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Competition Commission of India (CCI) orders probe against Tata Motors for alleged unfair business practices

By Snehal Khemka      10 May, 2021 05:57 PM      0 Comments
Competition Commission of India (CCI) orders probe against Tata Motors for alleged unfair business practices

The Competition Commission of India has ordered a detailed investigation into Tata Motors to examine the allegations raised on its abuse of its dominant market position.

The competition regulator has ordered the Director-General, CCI to submit an investigation report into the allegations in two months. In an order dated Tuesday, May 4, 2021 CCI said it finds Tata Motors is in primary facie contravention of Sections 3(4) Section 4 of the Competition Act, 2002 which states that no entity shall abuse its dominant position.

The commission noted that the dealers who have complained against the automaker are aggrieved of the fact that Tata Motors has imposed unfair terms and conditions in the dealership agreement for commercial vehicles.

The order was issued in response to two cases filed against TaMo in 2019 and 2020 respectively. While the 2019 complaint is from a dealer based in Varanasi, Uttar Pradesh, the 2020 complaint was filed by a Nasik-based dealer.

The dealers have alleged that TaMo abused its dominant position to push finance extended by its captive finance firms Tata Capital & Tata Finance to the disadvantage of the dealership, and cited dealership agreements signed with the company as "anti-competitive".

In their complaint, the dealers have alleged that Tata Motors intended to unduly favour its own captive financing companies to the exclusion of others, and the two companies are given unilateral powers to dictate terms & conditions for dealers. Furthermore, dealers are confined to a territory specified in the Dealership Agreement, and the company indulges in resale price maintenance, the complaint read.

The Finance facility extended by Tata Capital and Tata Motors Finance took away the decision making power of the dealer, a copy of the order quotes, adding that they unfairly imposed liability of unpaid instalments of the borrower on the dealer, which caused depletion of working capital of the dealer and eventually made it financially sick.

Tata Motors defended the allegations and has argued that the concerns raised by dealers are inherently "commercial & contractual" in nature and that the remedy doesn't lie with CCI.

In an official statement, Tata Motors 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 levelled against TML. TML is currently reviewing the copy of the order available in the public domain and will consult its legal counsels to take necessary steps.”

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