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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 !!!