Appeal No. 60, 61 and 62/2014. Case: Toyota Kirloskar Motor Private Limited and Ors. Vs Competition Commission of India and Ors.. COMPAT (Competition Appellate Tribunal)
| Case Number | Appeal No. 60, 61 and 62/2014 |
| Counsel | For Appellant: Percival Billimoria, Roopali Singh, Rahul Goel, Anu Monga, Rahul Satyan, Samir Agrawal, Sayobani Basu, Neeraj Lalwani and Rishabh Arora, Advocates and For Respondents: Salman Khurshid, Senior Advocate, Vaibhav Gaggar, Reena Kumari, Tushar Gupta, Saksham Dhingra, Smriti Jain, Sakshi Kotiyal, Sanchita Ain, Azra Rehman, Neha Mishra... |
| Judges | G.S. Singhvi, J. (Chairman), Rajeev Kher and Anita Kapur, Members |
| Issue | Competition Act, 2002 â Sections 15(2), 19, 19(3), 19(4), 19(4) - 19(7), 19(4)(h), 2, 2 (t), 2(r), 2(r)(s), 2(s), 2(t), 26, 26 (1), 26(1), 27, 27 (1), 27(b), 3, 3 (4), 3 (4) (c), 3 (4) (d), 3 (5), 3(1), 3(3)(a), 3(3)(b), 3(4), 3(4) (b), 3(4) (c), 3(4) (d), 3(4)(b), 3(4)(c), 3(4)(d), 3(5), 3(5)(1), 3(5)(i), 33, 36, 36 (1), 4, 4 (2), 4 (2) (e),... |
| Judgement Date | December 09, 2016 |
| Court | COMPAT (Competition Appellate Tribunal) |
Order:
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Whether the Competition Commission of India (the Commission) erred in holding appellants' distributions/sales agreements and practices violative of Section 3(4) & Section 4 of the Competition Act (Act) is the subject matter of these appeals.
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Appellants M/s. Toyota Kirloskar Motor Private Limited (Toyota), M/s. Ford India Private Limited (Ford) and M/s. Nissan Motor India Private Limited (Nissan) filed these appeals against the common order of the Commission dated 25.08.2014 on 17.10.2014 (Toyota) and 30.10.2014 (Nissan & Ford). Earlier Mr. Shamsher Kataria filed information dated 18.01.2011 before the Commission requesting an investigation into alleged abuse of dominant position and anti-competitive agreement/practices adopted by the by the respondents. The Commission considered the information and prima facie having been satisfied that the information warranted investigation directed the Director General to conduct an investigation into the matter and to submit the report within 60 days from the order dated 24.02.2011.
FACTS
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In order to briefly understand the facts in the information, we quote from paragraph 2 of the order under Section 26(1) of the Act passed by the Commission.
"The facts in brief as stated in the information are as under:
2.1 The information has been filed on 18.01.2011 by Mr. Shamsher Kataria, who owns cars manufactured by the respondent companies.
2.2 The informant owns and uses three cars.
i) Honda City, Registration No. DL4C AN 1134
ii) Fiat Palio, Registration No. DL3C V 3478
iii) Volkswagen Palo, Registration No. DL3C BM 8312
The informant has alleged that genuine spare parts, diagnostic tools, software and technological information is not made available by these car manufacturers to independent repair workshops (those which are not among authorized service centers of the car manufacturer). Also that these car companies have limited number of authorized service centers located in big towns only and therefore the informant is wary of travelling out of station due to concern of break down assistance.
2.3 The informant has stated that he earlier owned a Maruti Suzuki vehicle and could easily get it repaired at independent workshops because the spares and tools were made available by the company in the open market.
2.4 The informant has stated that cost of getting a car repaired in an independent workshop is cheaper by 35-50% as compared to the authorized service centers of the company. The informant has alleged that the respondent companies charge arbitrary and high price to consumers who are forced to avail the spares and the services from their authorized dealers only. Also, the prices charged for repair/maintenance services and for spares by these car companies are even higher than what they charge in other markets like Europe. The informant has alleged that this results in significant increase in maintenance cost to car owners.
2.5 The informant has found that the restriction by these car companies on supplying spares and other required tools and knowhow in the open market, is not a local problem. These companies and dealers appointed by them, as a matter of policy refuse to supply these services in the open market and to independent repair shops. The informant has submitted letters from some independent service stations, where they have expressed inability to service the informants vehicles because the respondents refuse to supply spares and other tools, in support of his allegation.
2.6 The informant has alleged that by not supplying the spares, tools, software etc. required to repair or service their cars, the respondent companies in conjunction with their authorized dealers/service stations have indulged into directly determining the sale price of spare parts and repair/maintenance services. In addition, such agreement and practice by these car manufactures has resulted into denial of market access to independent repair workshops.
2.7 The informant has stated that as per a CII report, the size of Indian Automotive industry is estimated to be US$ 122-159 billion by the year 2016, which will be larger than the US market. Growth in the market of spare parts, replacement parts, service and maintenance etc. is expected to be proportionate to the growth in the vehicle sales, as enumerated above.
2.8 The informant has alleged that the restrictive and monopolistic trade practices, as detailed above, of the respondents and their authorized dealers/service stations have a negative effect not only on the consumer but the whole economy because it increases the cost of keeping a vehicle. The informant has stated that in a country where road transport is essential for mobility of people and goods, the increased cost of vehicle maintenance may hamper economic growth of the country.
2.9 The informant has stated that effective competition at each level of automotive aftermarket is essential for fostering innovation and keeping mobility affordable. Consumer should have choice of getting vehicle services/repaired at a workshop of his choice. This will foster competition among service providers which will lead to improvement in quality and drop in prices. It will also foster innovation in the market. The informant has alleged that due to the restrictive trade practices of the respondent companies, effective competition at each level of automotive aftermarket is adversely affected.
2.10 The informant has also alleged that the anti competitive practices by the respondent companies has resulted in denial of market access to independent workshops who are usually micro, small and medium enterprises (MSME). The informant has stated that MSMEs give employment to 45% of industrial workers. The government has made several policies to encourage and support the MSME sector.
2.11 The informant has stated that the European Commission has the so called "Block Exemption Rule' in place since the year 2002 to force auto manufacturers to provide spares and tools etc. to independent operators. These rules prohibit discrimination between authorized service dealers and independent operators. The European Commission took commitments from auto majors to ensure supply of spares and technological knowhow to independent operators. To ensure effective competition in the auto repair and maintenance market, the European Commission issued the new regulation No. 461/2010 in the year 2010, which included sector specific guidelines apart from the earlier block exemption rules.
2.12 The informant has stated that there are regulations in place in the United States to ensure that emissions related diagnostic tools and information is available to independent vehicle repair shops. Several states have introduced the 'Right to Repair Act' to curb restrictive practices by auto manufactures.
2.13 The informant has alleged that all over the world consumers and governments are fighting to implement a free and fair competition regime in the automotive sector, with various degrees of success. The informant also alleges that auto manufacturers along with their authorized dealers are indulging in anti competitive practices and misusing their dominant position by undermining the rights of consumers.
2.14 The informant has alleged that the acts of the respondents in restricting the sale and supply of spare parts and technical information, diagnostic equipments and tools to independent automobile service providers indirectly determines purchase or sale prices of both vehicle spare parts and servicing, maintenance and repair jobs due to the monopoly maintained by them over the supply of genuine spare parts and the information and tools required for the servicing and repair of vehicles. This is in direct contravention of Sections 3(3)(a) and 3(3)(b) of the Competition Act, 2002. By refusing to sell the spare parts to independent operators the respondents attract Sec 3(4)(d) of the Act. Also the respondents have denied access to the repair and maintenance market to independent service providers and therefore such practices attract Sec 4(2)(a), 4(2)(b) and 4(2)(c) of the Act.
2.15 The informant has alleged that the acts of the respondents are arbitrary, illegal and devastating to free and fair competition. The informant has submitted that the balance of convenience lies in his favour and therefore the Commission may pass ex-parte ad interim order, u/s. 33 of the Competition Act, restraining the respondents and its agents from engaging in unfair practices and abuse of dominance.
2.16 The relief sought by the informant is, inter alia, to order the respondents and their authorized dealers/service centers to desist from alleged restrictive, unfair and monopolistic trade practices.
2.17 The informant in his supplementary information to the Commission on 28.01.2011, has alleged that the respondents and other vehicle manufacturers impose restrictions on their original equipment suppliers (OES) forcing them not to supply parts in the open market. It is alleged that such practices amount to limiting and controlling production and supply of components/spares in the automobile aftermarket. Such restrictive practices attract Sec 4(2)(d) of the Competition Act. In this reference the informant has submitted that the European Commission has effectively tackled this very aspect under their block exemption rules by affording statutory right to OES to sell vehicle parts in the open market.
2.18 The informant has also alleged in the supplementary information that the restriction by respondents on their authorized dealers from taking up dealership of other vehicle manufacturers, is contravention of the Competition Act, 2002, u/s. 4(2)(a), 4(2)(b) and 4(2)(c)."
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After beginning his investigation, the DG made a request on 19.04.2011 for directions to initiate investigation against other car manufacturers, inter-alia stating that the scope of investigation needs to be widened in this case. The Commission considered the DG's note and approved...
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