The Competition Commission of India (CCI), the country's competition watchdog, has ordered a probe against Tata Motors based on prima facie evidence that the company used its dominant market position to ‘coerce its dealers to order the vehicles according to its own whims and fancies’.
In its 45-page order, dated May 4, the regulator observed that Tata Motors violated section 4 (abuse of dominant position) of the Competition Act.
What are the charges against Tata Motors?
The CCI order comes after two former Tata dealers alleged that the company dictated terms around the quantity and type of vehicles they should stock. The complainants add that Tata's dealership agreement restricts the dealer from starting, acquiring, or indulging in any new business (of product or services) even if it is not related to the automobile industry. The complaint has been filed against Tata Motors, Tata Capital Financial Services Limited and Tata Motors Finance Limited.
What is the CCI order?
The CCI order points out that the terms and conditions dictated by Tata Motors in its dealer agreements for commercial vehicles were unfair.
"In this backdrop, having considered the dominance of Tata Motors in the relevant market… the Commission deems it appropriate to confine the investigation concerning the clauses of the dealership agreements and conduct in respect of commercial vehicles… executed between the dealers and Tata Motors," read the CCI order.
Has the guilt been determined?
CCI order clarifies that nothing stated in this order shall be tantamount to a final expression of opinion on the merits of the case. Thus, it has ordered its DG, investigation arm, to further probe the matter.
How Tata Motors plans to respond?
The company has denied any wrongdoing while pointing out that CCI's findings into the allegations are not final. It has further said that the company is consulting its legal counsels, according to a Reuters report.
Tata Motors has over 40 percent market share of commercial vehicles in India. Last month, Tata Motors registered a 41 percent year-on-year decline in domestic sales due to coronavirus-induced lockdown restrictions.
Can Tata Motors be penalised?
According to Section 33 of the Competition Act, 2002, CCI can issue an interim order to restrain the party from carrying out anti-competitive acts. Besides, it can also impose a fine on the party.
However, the course of action is decided by the CCI only after its DG drafts a report in the matter. Currently, Tata Motors has been found violating sections of the Competition Act only on a prima facie basis.
First Published: IST