Hyundai India Fined Rs. 87 Cr For Anti-Competitive Practices [Read Order]

The Competition Commission of India has noted that Hyundai Motors India Limited (HMIL) contravened the provisions of Section 3(4)(a) and 3(4)(e) read with Section 3(1) of the Competition Act.

The commission found out that HMIL was involved in monitoring of the maximum permissible discount levels through a discount control mechanism, and such an arrangement resulted into resale price maintenance, which falls foul of Section 3(4)(e) read with Section 3(1) of the Act.

Hyundai Motors was also involved in the practice of recommending lubricants/ oils and the dealers were mandated to use the recommended lubricants/ oils, in order to avoid being penalised.

The commission found this practice to be in contravention of Section 3(4)(a) read with Section 3(1) of the Act.

HMIL was directed to cease and desist from engagement in such anti-competitive activities.

The automobile industry should not be intervened with and should be subjected to the competitive policies.

Regarding the quantum of penalty to be fixed, the commission was faced with the issue that whether the penalty under Section 27(b) of the Act should only be imposed on the relevant turnover, or whether the entire turnover of HMIL should be taken into consideration for the purposes of imposing the penalty.

“120. After referring to the statutory scheme as engrafted in Section 27 of the Act and analysing the case law at length, the Hon’ble Supreme Court opined that adopting the criteria of ‘relevant turnover’ for the purpose of imposition of penalty will be more in tune with ethos of the Act and the legal principles which surround matters pertaining to imposition of penalties… When the agreement leading to contravention of Section 3 involves one product, there seems to be no justification for including other products of an enterprise for the purpose of imposing penalty. This is also clear from the opening words of Section 27 read with Section 3 which relate to one or more specified products.”

The commission noted that the anti-competitive practices, which resulted into resale price maintenance, pertain to sale of motor vehicles and therefore, the relevant turnover for the purposes of imposition of the penalty would be revenue from the sale of motor vehicles.

It also noted that the penalty should reflect the seriousness of the infringement and should also act as deterrence for future infringements. The aggravating and mitigating circumstances should be kept in mind while determining a penalty, which is proportionate to the infringement. Proportionality is achieved by balancing the harm caused to the society and the right of the infringer.

The commission found HMIL to be a first-time offender (mitigating circumstance) and, therefore, noted that a penalty of 0.3% over its average relevant turnover in the last three financial years would be a proportionate penalty. HMIL was, therefore, directed to pay Rs. 87 crore as penalty.