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India imposes 26.9-mln-USD penalty on Maruti Suzuki over dealer discount policy

Christian Fernsby |
India's competition regulator imposed a penalty of 200 crore rupees (26.9 million U.S. dollars) on Maruti Suzuki India Limited (MSIL), the country's biggest carmaker for anti-competitive practices related to how it forced dealers to discount cars, officials said Tuesday.

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"CCI passed a final order against MSIL for indulging in anti-competitive conduct of resale price maintenance in the passenger vehicle segment by way of implementing discount control policy vis-a-vis dealers, and accordingly, imposed a penalty of INR 200 crores (26.9 million U.S. dollars) upon MSIL, besides passing a cease-and-desist order," said a press statement issued by the Competition Commission of India (CCI).

The regulator found MSIL had an agreement with its dealers whereby the dealers were restrained from offering discounts to customers beyond those prescribed by MSIL.

"In other words, 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," the statement said.

Reports said CCI in 2019 started looking into allegations that MSIL forced its dealers to limit the discounts they offer, thereby effectively stifling competition among them and harming consumers who could have benefited from lower prices if dealers operated freely.

The regulator said to enforce the discount control policy, MSIL appointed Mystery Shopping Agencies (MSAs) who used to pose as customers to MSIL dealerships to find out if any additional discounts were being offered to customers.

"If found offered, the mystery shopping agencies would report to MSIL management with proof (audio/video recording) who, in turn, would send an e-mail to the errant dealership," CCI said. "If clarification was not offered by the dealership to the satisfaction of MSIL, the penalty would be imposed on the dealership and its employees, accompanied in some cases, by the threat of stopping supplies."

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