The Competition Commission of India recently imposed a penalty of Rs. 87 crore on Hyundai Motor India Limited for violating Section 3 of the Competition Act..Two previous dealers of Hyundai vehicles in India – FX Enterprise Solutions and St. Antony’s Cars – had filed complaints before CCI alleging anti-competitive behaviour on the part of the vehicle manufacturer..Talwar Thakore & Associates in collaboration with Vinod Dhall acted for FX through a team comprising Executive Chairman of Competition Law Vinod Dhall, Managing Associate Sonam Mathur and Associate Kabyashree Chaharia. Advocate Saraswat Mohapatra also represented FX in this matter while St. Antony’s was represented by Advocates KK Sharma and Bunmeet Singh Grover..FX alleged that Hyundai imposes a “Discount Control Mechanism” through which dealers are only permitted to provide a maximum permissible discount, resulting in resale price maintenance in contravention of Section 3(4)(e) of the Act. It was also contended that Hyundai mandates its dealers to use particular oil and lubricants and penalises its dealers where non-recommended oils are used, thereby resulting in a tie-in arrangement, in contravention of Section 3(4)(a) of the Act..The other informant alleged that Hyundai prohibited its dealers from investing in any other business, particularly in dealerships with competitors, amounting to refusal to deal in contravention of the Section 3(4)(d) of the Act..The Commission had passed orders in 2014, stating that a prima facie case was made out against Hyundai. Therefore, it had directed the Director General to investigate the allegations..The DG submitted a report in April 2016 finding Hyundai to have violated all the above mentioned provisions. In fact, the DG went one step further in finding that Hyundai’s actions amounted to abuse of dominant position under Section 4 of the Act..Hyundai, represented by Chandhiok & Associates’ Karan Singh Chandhiok, Vikram Sobti, Aroon Menon and Mathew George, filed replies rebutting the DG’s findings..The Commission held that the DG was not empowered to investigate violations of Section 4, since the informant had made no such complaint. Further, it held that it contravened the provisions of Section 3(4)(e) read with Section 3(1) of the Act through arrangements which resulted in Resale Price Maintenance. Also, Hyundai was found guilty of contravening Section 3(4)(a) read with Section 3(1) of the Act in mandating its dealers to use recommended lubricants/ oils and penalising them for use of non-recommended lubricants and oils..While deciding the quantum of penalty, CCI took note of the facts that Hyundai was a first time offender, had not made supra-normal profits as results of its actions, and that it has put in place a competition law compliance program. It also decided that penalty should be based on the relevant turnover of the company..“Therefore, the quantum of penalties imposed must correspond with the gravity of the offence and the same must be determined after having due regard to the mitigating and aggravating circumstances of the case.”.Thus, CCI imposed a penalty of 0.3 % of Hyundai’s average relevant turnover of the last three financial years, amounting to Rs. 87 crore, to be paid within 60 days..Read the order:
The Competition Commission of India recently imposed a penalty of Rs. 87 crore on Hyundai Motor India Limited for violating Section 3 of the Competition Act..Two previous dealers of Hyundai vehicles in India – FX Enterprise Solutions and St. Antony’s Cars – had filed complaints before CCI alleging anti-competitive behaviour on the part of the vehicle manufacturer..Talwar Thakore & Associates in collaboration with Vinod Dhall acted for FX through a team comprising Executive Chairman of Competition Law Vinod Dhall, Managing Associate Sonam Mathur and Associate Kabyashree Chaharia. Advocate Saraswat Mohapatra also represented FX in this matter while St. Antony’s was represented by Advocates KK Sharma and Bunmeet Singh Grover..FX alleged that Hyundai imposes a “Discount Control Mechanism” through which dealers are only permitted to provide a maximum permissible discount, resulting in resale price maintenance in contravention of Section 3(4)(e) of the Act. It was also contended that Hyundai mandates its dealers to use particular oil and lubricants and penalises its dealers where non-recommended oils are used, thereby resulting in a tie-in arrangement, in contravention of Section 3(4)(a) of the Act..The other informant alleged that Hyundai prohibited its dealers from investing in any other business, particularly in dealerships with competitors, amounting to refusal to deal in contravention of the Section 3(4)(d) of the Act..The Commission had passed orders in 2014, stating that a prima facie case was made out against Hyundai. Therefore, it had directed the Director General to investigate the allegations..The DG submitted a report in April 2016 finding Hyundai to have violated all the above mentioned provisions. In fact, the DG went one step further in finding that Hyundai’s actions amounted to abuse of dominant position under Section 4 of the Act..Hyundai, represented by Chandhiok & Associates’ Karan Singh Chandhiok, Vikram Sobti, Aroon Menon and Mathew George, filed replies rebutting the DG’s findings..The Commission held that the DG was not empowered to investigate violations of Section 4, since the informant had made no such complaint. Further, it held that it contravened the provisions of Section 3(4)(e) read with Section 3(1) of the Act through arrangements which resulted in Resale Price Maintenance. Also, Hyundai was found guilty of contravening Section 3(4)(a) read with Section 3(1) of the Act in mandating its dealers to use recommended lubricants/ oils and penalising them for use of non-recommended lubricants and oils..While deciding the quantum of penalty, CCI took note of the facts that Hyundai was a first time offender, had not made supra-normal profits as results of its actions, and that it has put in place a competition law compliance program. It also decided that penalty should be based on the relevant turnover of the company..“Therefore, the quantum of penalties imposed must correspond with the gravity of the offence and the same must be determined after having due regard to the mitigating and aggravating circumstances of the case.”.Thus, CCI imposed a penalty of 0.3 % of Hyundai’s average relevant turnover of the last three financial years, amounting to Rs. 87 crore, to be paid within 60 days..Read the order:
