Maruti Suzuki: CCI Fines India’s Biggest Carmaker Rs 200 cr Over Dealer Discount Policy

The Competition Commission of India (CCI) on Monday imposed a penalty of Rs 200 crore on Maruti Suzuki India Limited (MSIL) for anti-competitive conduct of Resale Price Maintenance (RPM) in the passenger vehicle segment, the ministry of corporate affairs said in a statement. In 2019, the watchdog started looking into allegations that Maruti forces its dealers to limit the discounts they offer. This ultimately results in affecting consumers who could have benefited from lower prices if dealers operated freely. The regulator found that Maruti Suzuki had an agreement with its dealers whereby the dealers were restrained from offering discounts to the customers beyond those prescribed by the automaker.

Under ‘Discount Control Policy for its dealers, India’s largest carmaker discouraged the dealers from giving extra discounts, freebies, etc. to the consumers beyond what were permitted by the company. The dealers had to take a prior approval from Maruti Suzuki for offering any discounts.

“Any dealer found violating such Discount Control Policy was threatened with imposition of penalty, not only upon the dealership, but also upon its individual persons, including direct sales executive, regional manager, showroom manager, team leader, etc,” the ministry said in a statement.

To enforce the Discount Control Policy, Maruti Suzuki appointed Mystery Shopping Agencies who used to pose as customers to the dealers to find out if any additional discounts were being offered to customers.

“If found offered, the MSA would report to MSIL management with proof (audio/ video recording) who, in turn, would send an e-mail to the errant dealership with a ‘Mystery Shopping Audit Report’, confronting them with the additional discount offered and asking for clarification. If clarification was not offered by the dealership to the satisfaction of MSIL, penalty would be imposed on the dealership and its employees, accompanied in some cases, by the threat of stopping supplies. Maruti Suzuki would even dictate to the dealership where the penalty had to be deposited and utilisation of the penalty amount was also done as per the diktats of the company.

Maruti Suzuki, however, told the regulator during the probe that there was no discount control policy that it imposed on dealers who were free to offer any discounts they wished to their customers, the order said.

“The CCI found that MSIL not only imposed the Discount Control Policy on its dealers, but also monitored and enforced the same by monitoring dealers through MSAs, imposing penalties on them and threatening strict action like stoppage of supply, collecting and recovering penalty, and utilisation of the same. Hence, such conduct of MSIL which resulted in appreciable adverse effect on competition within India, was found by CCI to be in contravention of the provisions of Section 3(4)(e) read with Section 3(1) of the Competition Act, 2002,” the ministry added.

“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 law. MSIL has always worked in the best interests of consumers and will continue to do so in the future,” Maruti Suzuki spokesperson said. Maruti Suzuki sells one in every two cars in India.