- By Archit Gupta, 4th Year, B.A.LLB (Hons.), National Law Institute University, Bhopal
The automobile industry is one of the largest industries in the world as well as in India. With increasing globalization and urbanization, the demand for motor vehicles is on the rise. The consumers are willing to pay a hefty amount to ensure that they have the latest technology and well known brand in their garage. The growth of this industry has been substantial after 1991 reforms in India and large scale development of roads in urban areas. Now the country in not only self-sufficient in manufacturing of various automobiles, but is also exporting to other countries.
The recent decision where 14 automobile manufacturers[i] were fined by the Competition Commission for their anti-competitive practices and abuse of dominance throws light on why automobile industry has to be worried about competition laws[ii]. The complaint was filed by one Shamsher Kataria alleging anti-competitive practices and abuse of dominance by 3 car manufacturers. However after the request of DG of the Commission that similar practices might be happening in the entire automobile industry, the ambit of the investigation was extended to these 14 manufactures.
The informant alleged that the components and parts used in the manufacture of automobiles were often sourced from independent, original equipment suppliers (“OESs”) while other suppliers were restrained by the car manufacturers from selling in the open market. Such restrictions on the OESs limited the access of such spare parts/components in the open market.
One of the main arguments given by the car manufacturers was against the existence of two separate relevant markets. It was argued that there is one automobile market, which also includes after sale services and spare parts. However, this contention was turned down by the Commission observing that there are two separate relevant markets, one for the manufacture and sale of cars and other for the sale of spare parts and after sale repair services. It was also observed by the Commission, that each automobile manufacturer is a dominant entity in the aftermarket for the spare parts of its products. Since every spare part has a unique specification, it was not possible for a customer of one automobile to use spare parts and repair services for other automobile manufacturers.
In most cases, the owners of the automobiles were completely dependent on the authorized dealer network of the automobile manufacturers and were not in a position to avail services of independent repairers. In addition to this, nearly all the automobile manufacturers had warranty clauses which effectively denied any warranty to the owners of automobiles, if such owners availed the services of the independent repairers or other multi brand service providers. Further, none of the automobile manufacturers allowed their diagnostic tools, repair manuals etc., to be sold in the open market, thereby foreclosing independent repairers from the aftermarket for repairs and maintenance.
The Commission in addition to imposing a penalty of about Rs. 2545 crores along with a cease & desist order, inter alia, directed the automobile manufacturers to ensure that spare parts and diagnostic services are available in open market to the independent dealers without any restriction on them.
This is the first order of the Commission which covers the concept of ‘aftermarkets’ and in which an agreement under Section 3(4) of the Act[iii] was found to have an appreciable adverse effect on competition in India. There is a connection of Section 3(4) and Section 4 of the Act in the instant case, since dominance in the aftermarket for sale of spare parts and repair of automobiles is created through a series of agreements and arrangements of the nature prohibited under Section 3(4). The Automobile manufacturers were abusing their dominance in violation of Section 4 of the Act, thus resulting in a vicious circle where the OES’ bargaining position is progressively weakened and the Automobile manufacturers continue imposing restrictive clauses; further strengthening their dominance.
Although this order has gone through various aspects involved in the market of spare parts and repair services, yet it had failed to lay down essential criteria for deciding a relevant market. The CCI has simply stated that the dependence of customers on the automobile manufacturers for the purchase of spare parts is the reason behind the determination of a single relevant market. Further, the order has been criticized by SIAM[iv]. The order may also affect other industries like electronic and software companies, where manufacturers impose unnecessary restrictions to force customers to buy spare parts from them.
It is interesting to note that cases with similar facts are being examined in other jurisdictions also where competition regime is quite strong. China has imposed a penalty of approximately $200 Million on ten Japanese auto-parts and bearings manufacturers [v]and South Africa is examining allegations that automotive component manufacturers colluded while bidding for tenders floated by car manufacturers.[vi]
Many of these automobile manufacturers had approached the Delhi High Court against this order, but they were asked to take their case before Madras High Court where the appeal was pending. [vii]
[i] BMW India, Ford India, General Motors India, Hindustan Motors, Mahindra & Mahindra, Maruti Suzuki, Mercedes-Benz India, Nissan Motor India, Skoda Auto India, Tata Motors, Toyota, Honda India, Volkswagen India and Fiat India. CCI is yet to pass final order against Hyundai India, Mahindra Reva and Premier.
[ii] Shamsher Kataria v. Hondo Siel Cars and Ors CCI Case No 03/2011
[iv] Car, component companies differ on CCI Order available at
[v] China Fines Japan Auto-Parts Makers $ 200 Million available at
[vi] Competition Commission moves to investigate car industry available at
[vii] Delhi High Court grants 3-weeks protection to Mercedes Benz from CCI Order available at