CCI slaps Rs 200 crore penalty on Maruti Suzuki for curbing discounts

The Competition Commission of India (CCI) has imposed a penalty of Rs 200 crore on Maruti Suzuki India Ltd (MSIL) for implementing a Discount Control Policy whereby dealers were restrained from offering discounts to the customers beyond those prescribed by MSIL.

As per the CCI release, the order against Maruti is on account of indulging in anti-competitive conduct of Resale Price Maintenance (‘RPM’) in the passenger vehicle, besides passing a cease-and-desist order. CCI found that MSIL had an agreement with its dealers which discouraged them from giving extra discounts, freebies to the consumers beyond what were permitted by MSIL.

The CCI release details that if a dealer wanted to offer additional discounts, prior approval of MSIL was mandatory. 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.

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 they were 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.

According to the competition watchdog, 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. MSIL 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 MSIL.

According to CCI, 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. It further noted that, such conduct resulted in appreciable adverse effect on competition within India.

Responding to the CCI order, Maruti Suzuki said in a statement: "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.”