After finding the automobile manufacturer, Tata Motors Ltd’s conduct as prima facie abuse of dominance and anti-competitive, the Competition Commission of India(CCI) ordered an investigation against the company.
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Tata Motors Clauses Are Harmful For Competitions
According to the regulator, certain clauses present in Tata Motors’ dealership agreement can prevent the entry of new players into the market.
It may also result in potentially killing competition by hindering entry into the Indian commercial vehicles market.
As per this complaint, Tata Motors imposed unfair terms and conditions in its dealership agreement for commercial vehicles.
Further, as mentioned in the complaint, Tata Motors coerces its dealers to order the vehicles according to its own whims and fancies.
Basically, they compel the dealers to copy-paste the list of vehicles provided by Tata Motors on the dealer’s letterhead and send it back to the company.
The complainants alleged that the clauses in the agreement also allowed Tata Motors to restrict and confine the territory of its dealers.
What Does Tata Motors Say?
In response to this comment, Tata Motors mentioned that it is currently reviewing the copy of the order available in the public domain.
The vehicle maker will also consult its legal counsel to take the necessary steps.
Tata Motors spokesperson said, “We understand that the CCI has passed a prima facie order and has not made any final or binding observations with regard to the allegations leveled against Tata Motors,”.
Tata Motors Dominance In The Market
So far, Tata Motors has a market share of 43% in the commercial vehicles segment, which is high compared to competing manufacturers such as Mahindra & Mahindra, Ashok Leyland and VECV-Eicher.
According to CCI, this allows the company to operate independently of the competing forces.
The CCI examined the allegations of abuse of dominance and anti-competitive clauses in the dealership agreement, considering Tata Motors’ dominance.
Prima Facie An Abuse Of Dominance
Considering the company’s email exchanges with its dealer Varanasi Auto Sales Pvt. Ltd, the regulator said that on the face of it, the emails suggest that Tata Motors indulged in the practice of coercing the dealers to bill vehicles as per its own needs and requirements.
Further added, “The same may result in swarming dealers with a stock of slow-moving vehicles and may further impair the financial health of the dealer … Such a practice appears to be an unfair imposition upon the dealers…”.
This conduct is found to be prima facie an abuse of dominance, according to the regulator.
Apart from this, the CCI also examined a clause in the Tata Motors dealership agreement.
According to this, the dealer shall not start, acquire or indulge in any new business of product or services even if it is not related to the automobile industry.
The clause appears to be unduly restrictive and expansive in its coverage and interferes with the freedom of trade, according to CCI.
CCI further said, “The Commission is prima facie of the opinion that such clause is an unfair imposition upon the dealers besides resulting in a denial of market access to the dealers to other markets…”.
Further adding that the matter requires an in-depth investigation.
So far, the regulator directed its investigation arm to examine the allegations and Tata Motors defense in detail and submit the report within 60 days.
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