Maruti’s Discount Control Policy effectively stifled dealer competition and prevented customers from getting additional discounts.
Maruti Suzuki, India’s largest carmaker, has been fined Rs 200 crore by the Competition Commission of India (CCI) for implementing its Discount Control Policy thatrestrains dealers from offering customer discounts beyond those prescribed by the carmaker.
Maruti's Discount Control Policy prohibits additional dealer discounts
Mystery Shopping Agencies appointed to enforce discount policy
Fined Rs 200 crore for effectively stifling dealer competition
What’s the exact allegation against Maruti Suzuki?
As per the CCI release, the order against Maruti is on account of indulging in the anti-competitive conduct of Resale Price Maintenance (‘RPM’) of its 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 the 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. If they were found offered, the MSA would report to MSIL management with proof (audio or video recording). MSIL, 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, a penalty would be imposed on it 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.
CCI further noted that, such conduct resulted in appreciable adverse effect on competition within India.
How has Maruti Suzuki reacted to the allegation?
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.”
Maruti, however, told the regulator during the probe that there was no discount control policy that it imposed on dealers, and that they were free to offer any discounts they wished to their customers.
The CCI order, however, contained extracts of several emails exchanged between dealers and Maruti officials, which made it "evident that the Discount Control Policy was controlled" by Maruti and not its dealers.