The Competition Commission of India (CCI) fined Maruti Suzuki, India’s largest carmaker, Rs 200 crore for implementing its Discount Control Policy, which prohibits dealers from offering customer discounts beyond those prescribed by the carmaker. Additional dealer discounts are prohibited by Maruti’s Discount Control Policy. Mystery Shopping Agencies have been hired to enforce the discount policy. A fine of Rs 200 crore was imposed for effectively stifling dealer competition.
What exactly is the charge levelled against Maruti Suzuki?
According to the CCI release, the order against Maruti is for engaging in anti-competitive Resale Price Maintenance (‘RPM’) of its passenger vehicle, as well as passing a cease-and-desist order. CCI discovered that MSIL had an agreement with its dealers that discouraged them from providing additional discounts or freebies to consumers beyond what MSIL permitted.
According to the CCI release, if a dealer wanted to offer additional discounts, MSIL approval was required in advance. Any dealer found in violation of the Discount Control Policy faced a penalty imposed not only on the dealership, but also on its individual employees, including direct sales executives, regional managers, showroom managers, and team leaders.
To enforce the Discount Control Policy, MSIL hired Mystery Shopping Agencies (MSAs), who pretended to be customers at MSIL dealerships in order to determine whether any additional discounts were being offered. The MSA would report to MSIL management if they were found to be offered, and (audio or video recording). After receiving a ‘Mystery Shopping Audit Report’, MSIL confronted the dealership with the additional discount given and asked for clarity in a follow-up email.
For example, if the dealership did not provide MSIL with satisfactory clarification, a penalty would be assessed against it and its personnel, and in some situations, supply might be halted. MSIL would even tell the dealership where the penalty should be stored, and how it should be used, all according to MSIL’s instructions.
As a result of these actions, the CCI noted, there was a significant impact on competition in India.
In what way has Maruti Suzuki responded?
Maruti Suzuki issued a statement in response to the CCI order: “We have seen the order dated 23 August 2021 published by the Competition Commission of India. We are examining the order and will take appropriate actions under the law. MSIL has always worked in the best interests of consumers and will continue to do so in the future.”
It was revealed that Maruti had not imposed any restrictions on its dealers’ ability to give discounts to their consumers during the investigation.
Maruti and its dealers were in control of the Discount Control Policy, according to the CCI order, which included excerpts from many emails exchanged between dealers and Maruti management.
