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Wednesday, 27 August 2014 00:00
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CCI auto penalty doesn’t fully address the issue

Over two crore car owners, if the Competition Commission of India (CCI) is to be believed, will heave a sigh of relief, with its R2,500 crore penalty on 14 automobile manufacturers including Maruti Suzuki and Tata Motors for indulging in anti-competitive practices in the spare parts market. According to the CCI, these firms were restricting access to spare parts and thereby ensuring customers had no option but to go to their authorised workshops for these parts—in the bargain, this probably helped these firms keep up dealer profits, vital to keep the dealer network happy. Once this is stopped, the hope is, prices of spare parts will fall and customers will get adequate choice.

To the extent the companies were stopping their original equipment vendors from supplying to the aftermarket, CCI has done well to come down on this practice; several automobile firms were putting all manner of other restrictions also on supplying spares to the aftermarkets, including not making public important technical information. Cracking down on this malpractice, however, is one thing; asking automobile firms to put in place an effective system to make spare parts as well as diagnostic tools available across the country and to independent repairers/garages is quite another. To be sure, the more service networks there are across the country, and the freer the availability of reasonably-priced spare parts, the better it is for the company as buyers do look at life-cycle costs of automobiles even if not in a very obvious manner.

But this has to be an economic choice of the automobile firm, it cannot be forced to set up an aftermarket network and train independent garages just because the CCI mandates it. Indeed, the CCI itself recognises a mitigating circumstance, but then goes on to dismiss it in an unreasonable manner. If an auto firm provides spares to the aftermarket, is it responsible for the spurious parts being sold (around a fourth of parts in the aftermarket are reckoned to be spurious)? The CCI admits this is a problem but says ‘this is something which may be separately brought to the notice of the government for appropriate action, which could include suitable action and setting up of an appropriate regulator’. Surely companies being asked to provide spare parts to the aftermarket need to have some form of legislative protection? Stopping a vibrant aftermarket for spares is anti-competitive, but companies are not bound to create a vibrant aftermarket for customers—moreover, companies have to be free to price their products and fix appropriate margins.


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