CCI slaps Rs 200 crore penalty on Maruti Suzuki for imposing ‘Discount Control Policy’ on dealers

Read Order: In Re Alleged Anti-competitive conduct by Maruti Suzuki India Limited

Pankaj Bajpai

New Delhi, August 25, 2021: While taking suo motu cognizance, the Competition Commission of India has imposed a Rs 200 crore penalty on Maruti Suzuki India Ltd. for indulging in anti-competitive conduct of Resale Price Maintenance (RPM) in the passenger vehicle segment by way of implementing Discount Control Policy vis-à-vis dealers. 

The Coram of Ashok Kumar Gupta (Chairperson), Sangeeta Verma (Member) and Bhagwant Singh Bishnoi (Member), also directed Maruti to cease and desist from continuing with such conduct. 

The present suo motu cognizance was taken by the Commission pursuant to an allegation by a Maruti dealer assailing its anti-competitive sales policy being violative to the provisions of the Competition Act, 2002. 

Accordingly, upon receiving direction from the CCI, the Director General (DG) conducted an investigation and found that Maruti had instructed its dealers to not offer discounts to the customers beyond the mandate prescribed by Maruti itself and had also appointed Mystery Shopping Agents (MSA) to keep a serious watch on its discount control policy.

After considering the report by the DG, the Commission found that Maruti had an agreement with its dealers whereby the dealers were restrained from offering discounts to the customers beyond those prescribed by Maruti, i.e. it had a ‘Discount Control Policy’ in place. 

The Coram further noted that if a dealer wanted to offer additional discounts, it would need to mandatorily obtain Maruti’s prior approval, and any dealer found violating the Discount Control Policy was threatened with imposition of penalty, not only upon the dealership but also upon its individual persons, including Direct Sales Executive, Regional Manager, Showroom Manager, Team Leader, etc.

To enforce such anti-competitive policy, Maruti had appointed MSA who used to pose as customers to Maruti Dealerships to find out if any additional discounts were being offered to customers, and based on their ‘Mystery Shopping Audit Report’, would impose penalty on the dealership and its employees along with threats of stopping supplies, observed the Commission. 

The CCI thus found that Maruti not only imposed the Discount Control Policy on its dealers but also monitored and enforced the same by monitoring dealers through MSAs, imposing penalties on them and threatening strict action like stoppage of supply, collecting and recovering penalty and utilization of the same. 

Accordingly, the Commission held that Maruti’s conduct, which resulted in appreciable adverse effect on competition within India, is in contravention of Sec. 3(4)(e) r.w.s. 3(1) of the Competition Act.