CCI On Car Industry

Competition Concerns – A Viewpoint :

Exclusive distribution agreements tend to reduce intra-brand competition while refusing access to the market at large.

Certain Branding agreements do not operate with the objective of restricting competition unless the supplier’s market position enables him to prevent other competitors from selling (as elaborated in EU Vertical Guidelines).

Vertical agreements are not considered anti-competitive by competition authorities and have some exemptions unless they fall in higher market share and /or have “ hard core” restrictions.

Important factors for competition analysis – level of entry barriers, buyer’s power and level of trade affected.

Unless the agreement is with a dominant player, anti-competitive foreclosure or adverse effect on competition is not possible.

CAR MAKERS VIOLATE FAIRPLAY OBLIGATIONS AND CCI FINES THEM WITH $420 MILLION FOR VERTICAL RESTRAINTS IMPOSED ON THEIR AUTHORIZED DEALERS – IMPACTING (Competitive) PRICING

 CCI based its decision on Exclusive purchasing and non-compete obligations – Therefore, if a Honda consumer needs to repair or service his car, he will have to avail the services provided by Honda’s authorized dealers irrespective of the brand of car he owns. Therefore, the competitive constraints which a Honda car owner faces is in the aftermarket ( or secondary market of spare parts, after sales services w.r.t maintenance etc ) where he is locked in and is forced to avail the services and the spare parts specific to Honda branded cars.

READ NEWS –

http://in.reuters.com/article/2014/08/26/india-antitrust-autos-idINKBN0GQ0NP20140826

http://www.livemint.com/Money/3KcethdUaue7MLgIrXlYcP/Is-CCI-fine-on-auto-firms-another-empty-threat.html

CASE ANALYSIS

 

FINDINGS REGARDING THE AUTOMOBILE COMPANIES

 

  • Apart from Maruti; most of the other OEMs (Original Equipment Manager) have some restrictions on the ability of their authorized…

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