The Competition Commission of India (CCI) (the authority regulating competition in India) actively investigates allegations of anti-competitive behaviour in the automotive sector. The investigations carried out by the CCI are either initiated suo motu by the CCI, based on press reports and information flowing from parallel cases, or on the basis of information provided to it by third-party informants. The most notable competition-related issue in the automobile sector was Shamsher Kataria v Honda Siel Cars India Ltd & Ors, Case No. 03 of 2011 (CCI, 25 October 2014), in which the CCI investigated various automobile manufacturers for anticompetitive practices - it is understood they denied market access to branded spare parts and diagnostic tools and thereby hampered the ability of independent repairers to provide aftermarket repair and maintenance services to automobile owners.
Such practices have allowed automobile manufacturing companies not only to have monopolistic control over the spare parts and diagnostic tools market under their respective brands but also to charge arbitrary and steep prices for said products, in violation of the provisions of the Competition Act 2002 (the Competition Act).
The CCI observed that owing to technical specifications of the cars manufactured by each original equipment manufacturer (OEM), the spare parts of one brand cannot be used for the repair and maintenance of cars manufactured by another OEM. Since the spare parts of one OEM are not interchangeable or substitutable with that those of other OEMs, each OEM is shielded from competition in the aftermarket from existing competitors in the primary market.
Further, the agreements entered into by OEMs with their original equipment suppliers (OESs) and authorised dealers prohibit the sale of spare parts to independent repairers in the secondary market. The CCI was of the view that each OEM holds a position of strength, which enables it to affect its competitors in the secondary market or aftermarket, thereby limiting consumer choice and compelling consumers to behave in a manner beneficial to the OEMs, which allows them to enjoy a dominant position and strength in the aftermarket for spare parts.
In addition to levying a heavy penalty, the CCI directed OEMs not to place any restrictions on the operation of independent repairers and to allow OESs to sell spare parts freely in the open market. However, OEMs have been permitted to charge royalties or fees where they hold intellectual property rights on parts provided that the same is not in violation of the Competition Act. The order of the CCI was appealed by some of the automotive manufacturers before the Competition Law Appellate Tribunal (COMPACT), established under the Competition Act. COMPACT, while hearing the appeal, concurred with the findings of the CCI and upheld the penalty that was levied. This order of the COMPACT was stayed by the Supreme Court of India in November 2018.
While some of the automotive manufacturers chose to appeal to the COMPACT, others chose to file a writ petition in the High Court of Delhi, inter alia, challenging the constitutional validity of the decision-making process, adopted by the CCI while adjudicating matters. This writ petition was successful and the High Court of Delhi in April 2019 struck down the decision-making process as presently provided for in the Competition Act, as unconstitutional. In its order, the court allowed the appellant automotive manufactures to prefer an appeal against the order of the CCI to the National Company Law Appellate Tribunal (NCLAT) (which is now the appellate authority against an order of the CCI) within six weeks of 10 April 2019 and directed the NCLAT to entertain the appeals on their merits, unhindered by any period of limitation.
Usually, investigation by the CCI is initiated on the basis of claims brought by private parties or government authorities, which are either directly or indirectly aggrieved by the industry or party in question. There has not been much change in the nature of informants over the years, which can be said to be mixture of a private individuals, trade associations, chambers of commerce, direct competitors in the market, enterprises engaged in distributing activity for a dominant manufacturer, and others.
To date there have not been many reported cases relating to the automobile sector that have been adjudicated by the CCI and thus it would be difficult to comment on the trend of follow-on litigation. The case of Shamsher Kataria is one of the first cases where the complainant filed a complaint against more than one automobile manufacturer and pursuant to the investigation undertaken by the CCI, many others were impleaded as respondents.
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