Maruti discount practice under scanner as CCI orders probe

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New Delhi | Published: July 5, 2019 5:59:51 AM

In its order, the CCI has observed that Maruti has indulged in resale price maintenance by fixing the maximum discount which its dealers could offer to end-customers.

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The Competition Commission of India (CCI) on Thursday ordered an investigation against Maruti Suzuki for allegedly controlling discounts its dealers could offer to the customers, beyond a threshold decided by the company.

In ordering a probe, CCI has acted upon complaints Maruti does not permit its dealers to give extra discount to their customers beyond an approved level and if a dealer is found doing so, penalty is levied depending upon the number of incidents found in a particular financial year.

In its order, the CCI has observed that Maruti has indulged in resale price maintenance by fixing the maximum discount which its dealers could offer to end-customers.

“..a thorough and detailed investigation is required to be ordered to ascertain the factual position and modus operandi resorted to by Maruti as allegations prima facie reveal a fit case for investigation,” the anti-trust regulator said.

It has asked its investigation arm — the DG — to submit the investigation report within 150 days.
Commenting on the development, a Maruti spokesperson said, “We have seen the order on the CCI website. We are examining the same.”

Most of the carmakers generally limit the quantum of discounts a dealer can give to the consumers so that there is no price war among dealers, but as per the law it is described as resale price maintenance and is prohibited if it causes adverse effect on competition in India.

Maruti, in its submission to the CCI, denied imposition of retail price maintenance and instead stated that its dealership agreement allows dealers to sell the products at a price lower than the maximum recommended retail price. It also said penalties are imposed on account of violation of schemes and guidelines launched by the dealers and their failure to ensure consumer satisfaction, which the CCI said is not convincing.

“Investigation is required to ascertain as to whether such agreement that allows dealers to give additional discounts is also actually followed without any restraint,” the commission said.

While Maruti argued that there is no agreement with its dealers which involves discount control policy, CCI said Maruti’s submission is devoid of substance and merits rejection.

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