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India anti-trust watchdog fines carmakers $420 million

Commuters queue in a traffic jam in New Delhi on August 26, 2013

By Penelope Macrae

India’s anti-trust watchdog has fined 14 automakers a total of $420 million for restricting competition in the spare parts market and driving up prices, a official said Tuesday, a few days after Chinese regulators took similar action.

The Competition Commission of India found domestic automakers and local units of global vehicle manufacturers guilty of “anti-competitive conduct” by curbing the number of spare parts and ordered them to “immediately cease-and-desist”.

The commission said in a hefty 215-page report the automakers’ actions had made parts unnecessarily costly for around 20 million Indian consumers. Mark-ups on some parts were as high as 4,800 percent.

The body added some automakers behaved responsibly towards consumers in Western markets but failed to replicate such practices in India, which made their actions “even more deplorable”.

With India’s car market now the world’s sixth-largest, tighter regulation “is a sign it is maturing,” Deepesh Rathore, director of Delhi-based consultancy Emerging Markets Automotive Advisors, told AFP.

Among the global companies fined were Toyota, Nissan, Honda, Volkswagen, BMW, Mercedes-Benz, Ford and General Motors.

India's Prime Minister Narendra Modi delivers a speech from the Red Fort in New Delhi

Local companies fined included Maruti Suzuki, Hindustan Motors and India’s leading vehicle maker, Tata Motors, whose domestic operations are struggling.

Tata Motors, which was slapped with the biggest fine of 13.46 billion rupees ($223 million), said it would appeal.

Last week China fined 10 Japanese auto parts firms a total of more than $201 million for price-fixing, reportedly the biggest-ever such sum, as part of an anti-monopoly drive.

“Given the regulatory scrutiny automakers’ spare parts and service practices are receiving globally, it’s likely more automakers will start offering spare parts over the counter,” said Anil Sharma, analyst at global consultancy IHS.

The Indian fines come as other domestic market regulators crack down on suspect practices amid public anger over what is perceived as a climate of widespread corruption.

Right-wing Prime Minister Narendra Modi came to power in May on a platform of eradicating corruption.

The competition commission opened its investigation after learning about a spare parts shortage in India.

“The 14 car companies were found to be indulging in practices resulting in denial of market access to independent repairers” and not providing them with branded spare parts,” the commission said.

“The fines total 25.5 billion rupees ($420 million),” said a commission official, who asked not to be named, and represent two percent of the company’s annual revenue over three years.

The report contained statements by the carmakers that they “considered their service network adequate to handle all after-market service and spare parts of car owners”.

The report also lamented the lack of an “appropriate legislative and regulatory framework” for vehicle safety in India, which records some 100,000 deaths a year due to road accidents, according to World Health Organization data.

Indian traffic fatalities have soared amid a surge in the number of vehicles and bad roads while safety standards for cars and trucks made for the domestic market often lag far behind those made for Western markets.