PUZZLE

• This is the place where you can go very far by just sitting inside it.• Beggar cannot buy it , bur richer cant live

without it

Who am I ????

AUTOMOBILE

answer

COMPETITION ACT : AUTOMOBILE COMPANIES FINE

GROUP - 3

GROUP MEMBERS

• AKSHAY LIMAYE

• JAGRUTI GODAMBE

• ANGELA MONTERO

• CHINMAY MANKAR

• BHARAT TARACHNDANI

• SWATI JAIN

FLOW OF PRESENTATION

Introduction to automobile industry

Competition act

Types of agreements

Competition commission of India

Case study

Automotive Industry through the prism of Competition Act

AUTOMOBILE SECTOR

• Core manufacturing sector

• The automobile sector is one that has never ceased to demand

• The phasing out of quantitative trade restrictions lead to the growth of automobile industry

Components production and assembly sector grew fastest between the period of 1990 and 1997

Unit sales and production of automobiles rose from being 3,57,000 and 3,64,000 in 1990 to 7, 61,000 and 7, 70,000 in 1997 respectively

These figures established India’s robust appetite and encouraged further investment and subsequent growth in the automobile industry

1990 19970

200000

400000

600000

800000

1000000

1200000

1400000

1600000

Sales and Production

Production Sales

Post 1999 saw the expansion of domestic market for passenger cars

Annual number of production rose from 609,000 in 2002-03 to 1,620,000 in 2008-2009

Domestic demand for motorcycle also increased constantly from 648,000 in 1994-95 to 6,802,000 in 2008-09

Annual production of auto components rose from 4,470 million US dollars in 2001-02 to 18,000 million US dollars in 2007-08

The resultant upsurge in the last few years has seen more entrants and local manufacturing in the automotive sector has therefore become a success story

Production Demand0

1000000

2000000

3000000

4000000

5000000

6000000

7000000

8000000

2002-2003 2008-2009

COMPETITION ACT

FOR AUTOMOBILE SECTOR

WHY IT IS IMPOSED

• To engender fair play & ultimately promote consumer welfare

• In 90s production units increased in large numbers and demand for cars and bikes increased more in 2000

•Drafted in competition Act 2003 and replaced the MRTP Act 2009

• CCI. COMPAT. SUPREME COURT

OBJECTIVE

• To prevent practices having adverse effect on competition, promoting & sustaining competition in market

• Protecting interest of consumer & ensuring freedom of trade.

3 WAYS TO MAXIMIZE CONSUMER WELFARE

• Prohibiting anti competitive agreements and practices that harmfree trade & competition

• Preventing abuse of dominant position and anti competition practices that lead to such a dominant position

• Regulating MRA

SOLUTIONS

• Vertical Agreement and Horizontal agreement• Vertical agreements in the car industry were

treated more restrictively by EU competition law, than agreements falling under the general verticals block exemption

WHAT IS CCI…

• Competition Commission of India is a body of the Government of India responsible for enforcing The Competition Act, 2002 throughout India and to prevent activities that have an adverse effect on competition in India

COMPOSITION…

• The commission shall consist of a Chairperson which should not be less than two and not more than six other Members to be appointed by the Central Government

• The Chairperson and other Members shall be whole time Members

DUTIES OF COMMISSION…

• Subject to the provisions of the Act, it shall be the duty of the commission to eliminate practices having adverse effect on completion

• Protect the interest of consumers and ensure freedom of trade carried on by other participants, in market

POWERS OF COMMISSION…

• Impose penalty up to 10% of turnover

• Cease and desist order

• Recommend to government the division of dominant enterprise

• For those who would want to know more about C.C.I. visit

http://www.competition –commission-india.nic.in

• M/S nanavati wheels vs Hyundai Motor dealer alleg

CASE STUDY

CASE NO :- 03/2011

DATE: 27/07/2015

ORDER UNDER SECTION 27 OF

THE COMPETITION ACT, 2002

BACKGROUNDFiled by Mr. Shamsher Kataria, On 18.01.2011 Under Section 19 (1)(a) of the Competition Act,

2002 Filled against

1. Honda Siel Cars India Ltd2. Volkswagen India Pvt Ltd3. Fiat India Automobiles Ltd

Because of anti-competitive practices Non availability of genuine spare part in open

market

MAIN DG REPORT FINDINGS1.

1. Regarding passenger vehicle sector market

Primary

Manufacturing

Sales

Secondary

Complementary products

Secondary Products

e.g. Spare parts

MAIN DG REPORT FINDINGS 2. Regarding aftermarket of passenger vehicle

Subsegment-1

Supply of spare parts, diagnostic

tools etc.

Technical manuals,

Catalogues

Subsegment-2

Aftersales Service

Maintenance and Repaires

MAIN DG REPORT FINDINGS

3. Regarding Price of Spare Parts

OEM had escalated the price of spare parts

imposing unfair prices in the sale of spare parts in terms of section 4(2)(a)(ii) of the Act

FINDINGS RELATED TO HYUNDAI

Dealers are permitted to purchase spare parts from Hyundai or from vendors

Dealer are not allowed to purchase from OEMs who are suppliers

Restriction on dealers ability to deal in competing brand

Hyundai has leveraged its dominance in one relevant market (supply of spare parts) to protect the other relevant market (market for repair services)

violation of section 4(2)(e) of the Act

HUNDAI’S REPLY

Hyundai has largest service and sales network

412 dealers and more than 1,087 service points located across India

Hyundai has argued that the sector is unorganized and characterized by a lack of skills and proper training

Hyundai claimed that DG has misconstrued Hyundai’s relationship with its OESs

RULINGThe parties are asked to cease and desist from indulging in conduct which has been

found to be in contravention of the provisions of the Act

Building efficient network to make spare parts and diagnostic tools easily available

OESs are allowed to sell spare parts in the open market without any restriction, on prices, under their own brand name

All the restrictions or impediments on the operation of independent repairers/garages are removed

RULINGStandardization of parts so that they can be used across different

brands (e.g. tyres, batteries etc.)so as to give choice to consumers and repairers/service providers

OPs are directed not to impose a blanket condition that warranties would be cancelled if the consumer avails the services of any independent repairer

OPs may cancel the warranty only when the damage has been caused because of faulty repair work outside their authorized network

• In view of foregoing, a penalty of 2% of the total turnover in India may be imposed on Hyundai

As such, the penalty imposed on Hyundai is as follows:-

*last decimal point in the figures has been rounded off Name

Turnover for 2009-10 (in Rs. crores)*

Turnover for 2010-11 (in Rs. crores)*

Turnover for 2011-12 (in Rs. crores)*

Total Turnover for 3 years (in Rs. crores)*

Average turnover (in Rs. crores)*

Penalty @ 2% of the average Turnover (in Rs. crores)*

Hyundai 20269.37 20269.71 22499.99 63039.07 21013.02 420.2605

THANK YOU !!!