In a hard -hitting move, the Competition Commission of India (CCI) has slapped a hefty fine of Rs 87 crore on South Korean carmaker Hyundai Motor India Limited (HMIL) for contravention of ethical trade practises, including monitoring of maximum permissible discount levels through a Discount Control Mechanism.
Warning the automaker to cease and desist from indulging in conduct deemed to be in contravention of the provisions of the Act, the anti-trust watchdog imposed the penalty on Wednesday.
While passing its verdict, the commission noted that ex-showroom prices of cars sold to customers, which have been fixed by the company, including dealer margins is in violation of established provisions. It is alleged that while Hyundai dealers are permitted to offer discounts, there is an established "Discount Control Mechanism", by which the maximum discount a dealer can offer to end consumers is maintained. Penalties are imposed on dealers discovered violating the terms fixed by the company.
Further, the DG has found these arrangements restricting intra-brand competition among Hyundai dealers. "This impairs their ability to compete in price competition in the sale and distribution of Hyundai cars," CCI said. The commission has also found that Hyundai designates sources of supply for the complementary goods of CNG kits, lubricants and oils, and insurance services, for its dealers and distributors.
In imposing the penalty on HMIL, the fine was calculated at the rate of 0.3 percent of the company's average relevant turnover in the last three financial years. The penalty is to be deposited within 60 days of receipt of the order.
In response to the order, Hyundai said, "We are studying the order in detail and will take necessary course of action to challenge the order at appropriate level to protect the interest of our customers and channel partners by abiding (by) all the laws of land."
