CCI probing if Maruti forced its dealers to limit their discounts

  1. The Competition Commission of India(CCI) is looking into allegations against Maruti Suzuki for resorting to anti-competitive practices.
  2. The allegation is that Maruti Suzuki has forced its dealers to limit the discounts they offer which had effectively stifled the competition among the dealers.It had also harmed the consumers who could have benefited from lower prices if the dealers had operated freely.
  3. Automakers usually sell cars at wholesale prices to dealers who sell them to customers at a higher retail price that includes their commissions .It is up to the dealer to offer discounts and take a lower profit margin which they often do.
  4. However,Car makers at times set a limit on discounts its dealers could offer to ensure there is no price war among them but Indian law says this practice which is described as resale price maintenance is prohibited if it causes appreciable adverse effect on competition in India.
  5. In 2017, South Korean firm Hyundai’s India unit was fined $12.5 million by the CCI for antitrust violations including resale price maintenance.The CCI found that Hyundai had fixed the maximum amount of discount for its cars and restricted competition among dealers.
  6. Competition Commission of India is a statutory body of the Government of India established in 2003.It is responsible for enforcing Competition Act,2002 throughout India and to prevent activities that have an appreciable adverse effect on competition in India.
  7. The act prohibits (a)anti-competitive agreements (b)abuse of dominant position by enterprises and (c)regulates combinations (acquisition, acquiring of control and mergers and acquisitions) which causes or likely to cause an appreciable adverse effect on competition within India.

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