Competition Commission to serve notices to car makers over costly spare parts

Carmakers are accused of abusing their dominant position by making available spare parts only through their authorised dealers, who in turn sell them at higher rates

New Delhi: The Competition Commission of India (CCI) may soon send notices to as many as 17 carmakers, seeking their explanations on an alleged anti-competitive practice of selling spare parts to consumers at high prices, reports PTI.


The Director General of CCI has submitted a report after its investigation into the matter and the fair-trade regulator would serve show-cause notices to the carmakers after analysing findings of the probe, sources familiar with the development said.


CCI would take a final decision on this alleged anti-competitive practice after taking into account the replies submitted by the carmakers, along with the probe report of its Director General, which serves as its investigating arm.


Sources said that the notices could be served to 17 car markers but did not disclose the names.


The Commission is pursuing the case under Section 4 of the Competition Act that relates to abuse of dominant position by enterprises.


The probe was conducted after a complaint was filed with the CCI last year against certain carmakers for allegedly abusing their dominant market position by selling spare auto parts to customers at high prices.


As per the complaint, the carmakers were accused of abusing their dominant position by making available spare parts only through their authorised dealers, who in turn sell them on high rates.


Last month, the government had also said that the CCI is investigating allegations of anti-competitive practices by a section of carmakers in the country.


In a written reply to the Lok Sabha, Minister of State for Corporate Affairs RPN Singh had said the Commission had received certain information against some carmakers.


"The CCI, which is a quasi-judicial body, is getting the matter investigated for appropriate action in the matter as per the provisions of the Competition Act, 2002," the Minister had said.


Generally, CCI refers the complaints related to anti-competitive practices for further investigation by its Director General (DG), before taking any action.


CCI has the mandate to eliminate practices that have adverse impact on competition and protect the interests of consumers.




4 years ago

The Competition Commission of India should also send notices to Two wheeler manufacturers especially the one with foreign collaborators. I was refused a spare part (rear end shock absorbers) at Honda Activa showroom, using the cover, "Out of Stock." No idea when the stock will come?" If the same is out of stock, how come they manage to repair/service vehicles brought there for the same. I hope this will bring an end to the extremely costly replacements as we are not yet reach the stage of Use and Throw by giving two wheelers at the Authorized Showrooms/Service Centers.

Veeresh Malik

4 years ago

Brilliant step by the Competition Commission of India - as it becomes increasingly difficult to operate cars and bikes in India without getting into the clutches of these crooks.

Here's a good idea of how this has progressed in other countries - and what we should get from the manufacturers too:-

Mobile radiation: Use headsets or speaker phone as precaution

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Why Fed's stimulus will make little difference

When the markets finally realize the enormity of the debt problem across the world, no amount of stimulus will make much difference

The potential for additional stimulus may have distracted the markets, but it has not solved any problems. This is especially true in Europe where investors are concerned about Spanish banks. But are the real problems with the global economy limited to Europe? Or are the Spanish banks just a good example of what is soon to come?


An article about Spain published by the Financial Times in the fall of 2007 stated that there was a 21% rise in bad loans at a midsized Spanish bank, Banco Popular. The Bank of Spain wasn't concerned, because it considered Spanish banks well provisioned to sustain a two or even threefold rise in bad loans. Banco Popular provisions were 232% higher than its bad loans. Things change. While Spain's biggest banks, like Santander, BBVA and Caixabank, are in good shape, smaller regional banks, like Popular, have real issues. The recent stress test showed that Popular's bad loan provisions had been completely inadequate and that it had a €6 billion hole in its capital account.


It turns out that the problems in Spain are quite typical. Many of the larger banks in fast growing emerging markets are in relatively good shape, but the smaller banks are a mess. Like Spain, transparency is a major issue as the bad debts are either being hidden or ignored.


For example in South Korea the large banks are well capitalized and in theory unlikely to pose a systemic risk. These banks usually lend to safer, more solvent higher income customer. However there is another part of the financial system. These non banks or mutual savings institutions have grown rapidly. They specialize in lending to poorer or subprime borrowers. This lending has allowed household debt in South Korea to grow to 164% of disposable income. In the US before the crash, household debt had risen to about 120%. As the Korean economy slows, many of these debts will ultimately go bad potentially replaying the slump created by the credit card bubble that burst in 2003.


Recently a prominent Indian banker boasted that the Indian financial system was in good shape despite the down turn, because of its winning strategy of "boring banking". While this may be true of the private sector banks and the largest state banks, the smaller state owned banks are another story. In theory the level of nonperforming loans remains steady at just over 2%, but the number of 'restructured' loans has increased dramatically, over 50% by one recent estimate. State owned banks like the State Bank of India and 26 others account for 72% of total loans provided by Indian banks. They also hold 93% of the restructured loans. But 80% of these loans are held on the books of the smaller public sector banks. Many of these restructured loans were made to other public sector companies and infrastructure projects. In normal times only 15% of the restructured loans go bad, but these are not normal times. Like the Spanish banks the labelling of a loan as restructured just reduces the transparency, so it is difficult to determine the severity of the problem.


Vietnam also has a banking problem but most of its issues are apparently with the private sector banks. The state bank in Vietnam controls 70% of the market compared with only 16% for private domestic banks, but bad debts at these banks have, according to the central bank, reached alarming levels. The largest private bank, the Asia Commercial Bank, was listed in 2006. Just this month its CEO was arrested on suspicion of committing economic crimes.


Brazilian banks are having issues as well. Brazilian banks non-performing loan ratio in April 2012 was 7.9% exactly the same as Spain's average non-performing loan ratio of 7.91% reported a month earlier. After three years of deleveraging the US ratio is 4.2%. The problem is the same as Korea, massive consumer debt. Non-performing loans to consumers have risen to 8 per cent, the highest since November 2009. Consumer debt service burden is now at an unsustainable level of 24% of disposable income much higher than the 14% US consumers achieved before the 2008 collapse.


Then there is China. Certainly there is a 17% increase in bad loans for large banks like Bank of China, but at smaller banks like Ping An it is 50%. But the real problem is in the credit pyramids on everything from iron ore, to copper to cement mixers. The suppliers are selling on credit as are the buyers. Did I mention the shadow banking system?


Certainly the bad loans in Spain are severe, but the real problem has been the lack of transparency. In time the size of the problem will reveal itself in countries across the world. When the markets finally realize the real numbers, I doubt that any amount of stimulus will make much difference. 


(William Gamble is president of Emerging Market Strategies. An international lawyer and economist, he developed his theories beginning with his first hand experience and business dealings in the Russia starting in 1993. Mr Gamble holds two graduate law degrees. He was educated at Institute D'Etudes Politique, Trinity College, University of Miami School of Law, and University of Virginia Darden Graduate School of Business Administration. He was a member of the bar in three states, over four different federal courts and has spoken four languages. Mr Gamble can be contacted at [email protected] or [email protected].)


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