NEW DELHI: India’s anti-trust watchdog has found two-wheeler maker Honda Motorcycle and Scooter India (HMSI) abused its dominant market position by curtailing discounts that dealers could offer customers. A probe by Director General (DG) of the Competition Commission of India (CCI) has found that the company earned hundreds of crores in commissions from sale of batteries and engine oil by dealers by mandating them to sell select brands, a senior government official privy to the report told ET.
The CCI will give Honda time to respond to the report by the DG before ruling on the matter. HMSI did not reply to emailed requests for comment.
The report also found that the company required that dealers refuse to deal with competing products and forced them to accept slow-moving stock from the company to help it meet internal sales targets, the official, who did not wish to be identified, said.
Honda also debited dealership accounts for advertising expenses and forced dealers to enter into tie-ups with an agency specified by the company, the report has said. The report has charged the company with restricting dealers to sell only authorised annual maintenance contracts to customers at a rate fixed by the company.
The DG’s report claims to have found evidence of the market abuse through emails to dealers as also their depositions. Honda’s employees also provided evidence.
Dealers were forced to comply with the ‘anti-competitive’ practices imposed by the company failing which their dealership could be terminated, the report has observed. These conditions imposed on manufacturers could be seen as violations of Sections 3 and 4 of the Competition Act. These sections prohibit manufacturers from imposing unfair or discriminatory conditions or entering into agreements that are likely to cause appreciable adverse effect on competition.
Experts, however, have pointed out that guidelines on prices, restrictions on sale of allied products from select brands and geographical restrictions are common across the automotive industry.
“It becomes an issue when certain dealers offer lower prices because it creates inter-dealer rivalry. It also affects the resale price of the products which is part of the marketing promise to customers,” said an industry expert who wished to remain anonymous, adding that the practice of restricting dealers from cutting their own margins to offer discounts was not legal. He also said he expected that may expand investigations into the rest of the automobile sector if it did decide to penalise HMSI.