India Slaps $420 Million in Antitrust Fines on 14 Automakers

Aug 26, 2014 6:43 am ET

(Updates with comment from Mahindra in sixth paragraph.)

Aug. 26 (Bloomberg) -- India’s antitrust regulator fined 14 carmakers, including the local units of Honda Motor Co. and General Motors Co., a combined 25.4 billion rupees ($420 million) for stifling competition in the market for spare parts as the industry faces similar scrutiny in China.

The fines were equivalent to 2 percent of the carmakers’ three-year average revenue in India, according to a Competition Commission of India order dated Aug. 25. The regulator also ordered the companies to provide spare parts and diagnostic tools to independent garages, and honor warranties on cars repaired by them after markups reached as high as 4,817 percent.

“The car companies charged arbitrary and high prices for their spare parts” through their monopolistic control, the commission said in a statement. Car companies were also found to be “distorting fair competition” by using their dominant position to protect their market for repair services, it said.

The Indian penalties come at a time the auto industry’s bracing for the results of a similar investigation by Chinese authorities. At least eight carmakers have recently lowered prices in response to a probe by China’s National Development and Reform Commission.

“Regulators are getting more aggressive in emerging markets, which is logically the right thing to do as the markets reach a certain threshold,” said Deepesh Rathore, director at Emerging Markets Automotive Advisors in Delhi.

Will Appeal

In India, Tata Motors Ltd. drew the highest fine at 13.5 billion rupees, while Honda Cars India Ltd. was fined 784 million rupees, the most for a foreign brand. Minari Shah, a spokeswoman for Tata Motors, said that the company was still studying the order. Mahindra & Mahindra Ltd., which was fined 2.92 billion rupees, will appeal the decision, it said in a stock exchange filing.

The commission found that carmakers were able to charge high prices by providing spare parts only to authorized repair shops. Fiat SpA’s markup for components ranged from 19.9 percent to 4,817 percent, according to the commission.

Vishnu Mathur, director general of the Society of Indian Automobile Manufacturers, didn’t answer two calls to his mobile phone seeking comment.

Shares of automakers fell in Mumbai trading, with Mahindra declining 0.8 percent and Maruti Suzuki India Ltd. dropping 1.2 percent at the close in Mumbai.

‘More Deplorable’

Other companies that were fined by India’s competition commission are: Hindustan Motors Ltd. and the local units of Volkswagen AG, Fiat, Bayerische Motoren Werke AG, Ford Motor Co., General Motors Co., Daimler AG’s Mercedes-Benz, Nissan Motor Co., Toyota Motor Corp. and Volkswagen’s Skoda.

The restrictions have limited the full potential of the independent repair shops “at the cost of the consumers, service providers and dealers,” the commission said in the statement. The carmakers’ behavior is “even more deplorable” considering they had committed to consumer-friendly practices in Europe, the regulator said.

China’s NDRC last week found a dozen Japanese auto-parts makers guilty of price fixing and levied the biggest antitrust fines since relevant rules went into effect six years ago.