NCLAT quashes CCI order imposing Rs 87 crore penalty on Hyundai Motor

The National Company Law Appellate Tribunal today set aside an order passed by the Competition Commission of India (CCI), imposing Rs 87 crore penalty on Hyundai Motor India for indulging in anti-competitive practices in terms of the Competition Act, 2002..The CCI, in June 2017, had found Hyundai Motor in violation of Section 3(4)(a) read with Section 3(1) of the Act for mandating its dealers to use only the recommended lubricants and oils..Pursuant to the findings of the Commission, a cease and desist order was issued against Hyundai Motor, and a penalty at the rate of 0.3% of its average relevant turnover of the last three financial years was imposed by the market watchdog..A three-member Bench of the Appellate Tribunal comprising Chairperson Justice SJ Mukhopadhyaya, Member (Judicial) Justice AIS Cheema and Member (Technical) Balvinder Singh observed that the Commission did not discuss any evidence or the “Dealership Agreement” in question, on its own, to arrive at its conclusion..The Informant before the Commission alleged that Hyundai entered into exclusive dealership arrangements with its dealers by mandating that the dealers obtain its prior consent before taking up dealerships of another brand. It was further alleged that Hyundai Motor’s dealers were forced to procure spare parts, accessories and all other requirements, either directly from it or through “approved” vendors..The Director General, in its Report, found Hyundai Motor in violation of Sections 3(4)(a), 3(4)(b), 3(4)(d) and 3(4)(e) read with Section 3(1) of the Act, 2002 and Sections 4(2)(a)(i), 4(2)(a)(ii) and 4(2)(c) of the Act..Stating that “Director General’s report is merely an opinion primarily to assist the Commission”, the Appellate Tribunal said the anti-trust regulator is expected to analyse the evidence as well as the report, and then form its final opinion..It said,.“In the impugned judgment, it will be evident that no specific evidence has been discussed including the evidence relied on by the Appellant. The impugned order is only based on findings of the ‘DG’s’ which is not permissible.”.The Appellate Tribunal set aside the CCI order for failing to determine the ‘relevant geographic market’ as well as the ‘relevant product market’. The Appellate Tribunal also noted that the Commission failed to consider the accrual of any “benefits to consumers and improvements in production or distribution of goods or provision of services” due to the practice in question..“The ‘DG’, as well as the ‘Commission’, has not taken into consideration the regulatory trade barriers; local specification requirements and other factors for determining the ‘relevant geographic market’ nor has taken into consideration the physical characteristics or end use of goods, including price of goods or service; consumer preferences as required to be taken under sub-section (7) of Section 19 for determination of ‘relevant product market’.”, the Appellate Tribunal remarked..It is also recorded that the finding that Hyundai Motor mandated its dealers to use recommended lubricants/ oils, and imposed penalty for use of non-recommended lubricants and oils was also not based on any evidence..The Appellate Tribunal, therefore, quashed the Commission’s finding and stated,.“In view of such infirmity, we have no other option but to set aside the impugned order dated June 14, 2017. It is accordingly set aside. The Appellant will be entitled to refund of the amount, if any, deposited pursuant to the interim order dated July 18, 2017.”.Hyundai Motor was represented by Advocates Karan S. Chandhiok, Vikram Sobti, Kalyani Singh and Mehul Parti..The Commission was represented by Senior Advocate Salman Khurshid and Advocates Vaibhav Gaggar, Neha Mishra, Sweta Rath, Adarsh Chamoli, Aaushi Sharma, Anindita Sengupta, Zafar Khurshid, Gitanjali Kapur, Sakshi Kotiyal, Arpit Shukla and Azra Rehman..Read the Judgement:.Correction: Previously our headline and story wrongly indicated 87 Lakh instead of 87 Crore penalty. We regret this error.