CCI slaps Rs 200 crore penalty on Maruti Suzuki for restricting discounts by dealers

The Competition Commission of India (CCI) has passed a final order against the Maruti Suzuki India Limited (MSIL) for its "in anti-competitive conduct" of the Resale Price Maintenance (RPM). The order was on the grounds of the passenger vehicle segment to implement a Discount Control Policy. Maruti has been hit with a penalty of Rs 200 crore besides passing a cease-and-desist order.

An official release by the Ministry of Corporate Affairs said that the CCI found that the MSIL had an agreement with its dealers and they weren’t given the freedom of offering discounts to the customers beyond the limits set by the MSIL. The release said, "MSIL had a 'Discount Control Policy' in place for its dealers whereby the dealers were discouraged from giving extra discounts, freebies, etc. to the consumers beyond what was permitted by MSIL. If a dealer wanted to offer additional discounts, prior approval of MSIL was mandatory. Any dealer found violating such Discount Control Policy was threatened with the imposition of penalty, not only upon the dealership but also upon its individual persons including direct sales executive, regional manager, showroom manager and team leader.”

Role of the MSA in the operation 

The MSIL has appointed Mystery Shopping Agencies (MSAs) to enforce the Discount Control Policy. The MSAs acted as customers to MSIL dealerships and investigated if any additional discounts were being offered to the customers. When the MSA found that such discount restrictions existed, they would send a report to MSIL management with proof, like an audio or a video recording. The management would then send the report to the dealership named 'Mystery Shopping Audit Report' to confront them about the additional discounts being offered. The release said,  "If clarification was not offered by the dealership to the satisfaction of MSIL, a penalty would be imposed on the dealership and its employees, accompanied in some cases by the threat of stopping supplies.”

MSIL would also direct the dealership on the deposit of the penalty and utilisation of the "penalty amount was also done as per the diktats of MSIL". The release further said, "CCI found that MSIL 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. Hence, such conduct of MSIL which resulted in an appreciable adverse effect on competition within India, was found by CCI to be in contravention of the provisions of Section 3(4)(e) read with Section 3(1) of the Competition Act, 2002.”

(With ANI inputs)