CCI orders probe against Tata Motors for alleged unfair business practices

New Delhi: The Competition Commission has ordered a detailed probe against Tata Motors for alleged abuse of dominant position with respect to dealership agreements.

The order has come on two complaints filed against Tata Motors, Tata Capital Financial Services Ltd and Tata Motors Finance Ltd (opposite parties).

The Competition Commission of India (CCI) observed that the complainants are primarily aggrieved that Tata Motors has imposed unfair terms and conditions in the dealership agreement for commercial vehicles in abuse of its dominant position in contravention of the provisions of Section 4 of the Competition Act. Section 4 pertains to abuse of dominant position.

To assess the two complaints, the watchdog prima-facie delineated the ‘market for manufacture and sale of commercial vehicles in India’ as the relevant one.

In a 45-page order dated May 4, the regulator said it is of the view that prima facie a case of contravention of the provisions of Section 3(4) and Section 4 of the Competition Act is made out against Tata Motors and that the “matter requires to be investigated”.

The watchdog has directed its Director General (DG), the investigation arm, to probe the matter in detail.
Cases, where there is prima-facie evidence of violation of competition norms, are referred to the DG for a detailed investigation.

Before examining the issues on merit, the regulator said it is constrained to note that a fusillade of challenge has been laid to the various clauses of the agreements and the conduct emanating there from or antecedent thereto by the informants in an omnibus manner.

“In this backdrop, having considered the dominance of Tata Motors in the relevant market… the Commission deems it appropriate to confine the investigation with respect to the clauses of the dealership agreements and conduct in respect of commercial vehicles… executed between the dealers and Tata Motors,” it said.

Further, CCI made it clear that it was not examining the conduct of Tata Capital and Tata Motors Finance or the agreements executed by them with the dealers for channel financing, which do not appear to command any significant market power in the verticals where they are operating.

Regarding the allegation that the dealership agreement provides that 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, CCI said the same appears to be unduly restrictive and expansive in its coverage and interferes with the freedom of trade.

Tata Motors had submitted that the said clause does not seek to impose a blanket restriction on the dealer for seeking an NOC.

The opposite parties had also contended that disputes involved in the present cases are purely contractual and commercial in nature involving no competition concerns and therefore, CCI does not have the jurisdiction to examine the issues raised by the informants.

The regulator pointed out that it has “no hesitation in holding that merely because disputes raised are contractual in nature and thereby Commission does not have the jurisdiction, is devoid of any force and the same is accordingly rejected”.

As per the watchdog, nothing stated in this order shall be tantamount to a final expression of opinion on the merits of the case and the DG shall conduct the investigation without being swayed in any manner whatsoever by the observations made herein.