THE ICFAI UNIVERSITY, DEHRADUN

ICFAI LAW SCHOOL

CASE LAW - SHAMSHER KATARIA V. HONDA SIEL CARS INDIA

Submitted by: Shobhit raj singh Submitted to: M.s Shraddha Shukla

Enrollment Number: 17FLICDDN01104

SEC - B
 ACKNOWLEDGEMENT

I would like to extend my sincere thanks to mentor for having been my supervisor and having

given her excellent guidance throughout this work and this work would not have been

successful without her guidance.

Date – 17/06/2022 Shobhit raj singh ,

(17FLICDDN01104)
 INDEX

1- INTRODUCTION

2- PARTIES INVOLVED

3- ISSUE RAISED

4- ISSUE DISCUSSED

5- HELD

6- CONCLUSION
 SHAMSHER KATARIA V. HONDA SIEL CARS INDIA LTD.

CCI Case No- 03/2011

FACTS

The informant i.e. Shamsher Kataria informed that under section 19(1) of the competition act
2002, Honda Siel Cars India Ltd., Volkswagen India Pvt. Ltd. and Fiat India Automobiles Ltd.,
are not availing the general spare parts of their vehicles in the open market. The commission
took the matter into its consideration and ordered Director General under section 26(1) on the
date 24.02.2011 directed the DG to conduct an investigation into the matter and submit his
investigation report. From the preliminary enquiries which were made during the investigation
process, the DG opined that other automobile manufactures or Original Equipment
Manufacturers ( “OEMs”) (other than the three car manufacturers) might be indulging in same
restrictive trade practices while their sales service, procurement and sale of spare parts from the
Original Equipment Suppliers ( “OES”), setting up of dealerships etc. Later it appeared that the
case has a much wider perspective and anti competitive agreements are done on the larger area.
Then there were 14 other automobile companies who came into existence.

After the reports of the DG, the Commission decided to forward the copies of to all the 17
Opposite Parties for filing their replies/objections of its order dated 04.09.2012. Further
companies like Reva and Premier filed the applications on 01.02.2013 and 21.12.2012
respectively under Regulation 26 of the Competition Commission of India (General)
Regulations, 2009 in it these firms requested for striking out their names from the list of the
parties. Then ‘The Commission made it clear that at this stage, the present order governs the
alleged anti-competitive practices. The Commission shall pass separate order in respect of three
car manufacturers, viz., Hyundai, Reva and Premier after giving them reasonable opportunity to
make their submissions.
PARTIES INVOLVED IN THE CASE THE CASE

INFORMANT- Shree Shamsher Kataria

OPPOSITE PARTIES- Honda Siel Cars India Ltd., Volkswagen India Pvt Ltd., Fiat India
Automobiles Ltd., BMW India Pvt. Ltd. , Ford India Pvt. Ltd., General Motors India Pvt. Ltd.
Hindustan Motors Ltd., Mahindra & Mahindra Ltd., Maruti Suzuki India Ltd.
Mercedes-Benz India Pvt. Ltd., Nissan Motor India Pvt Ltd., Skoda Auto India Pvt. Ltd.
,Tata Motors Ltd., Toyota Kirloskar Motor Pvt. Ltd.

ISSUES RAISED

 Whether the parties have violated the provisions of section 3 or not?

ISSUES DISCUSSED

1. Whether the parties have violated the provisions of section 3 or not?

According to the section 3 clause (3) and (4), the act of the parties is violating and is creating an
appreciable adverse effect. The OEMs enter into the three types of agreements:

(a) agreements with overseas suppliers;

(b) agreements with local OESs

(c) agreements with authorized dealers

As noted in the order dated 25.08.2014, the spare parts supplied by the OESs can be broadly
categorized under the following heads:

(1) Where the design, drawing, technical specification, technology, knowhow, toolings (which
are essentially large machines required for manufacture of the spare parts), quality parameters
etc., are provided by the OEMs. The OESs are required to manufacture and supply such spare
parts according to the specified parameters;

(2) Where the patents, know-how, technology belongs to the OES, however, the parts are
manufactured based on the specifications, drawings, designs supplied by the OEM. The
tooling/tooling cost may also be borne by the OEM in some of these cases; and

(3) Where the spare parts are developed by the OESs as per their own specifications or designs
or designs and specifications which are commonly used in the automobile industry. Such parts
are only a few for instance , batteries, tyres etc.

Thus, the nature of any exclusive purchasing/distributive agreement on the part of a dominant
undertaking is abusive as there is denial of market access to certain portion of traders,
irrespective of the positive impact of the agreement on the competition.1On the basis of the report
of the DG report and all the submission made by all the parties, the Commission is of the view
that none of the present three OEMs allow their OESs to supply genuine spare parts directly into
the aftermarket. Also, all the three OEMs have justified their restrictions on the basis of IPR
protection and sought an exemption under section 3(5)(i) of the Act. Accordingly, the
Commission deems it appropriate to assess whether such an exemption is available to these
OEMs or not before concluding that the agreements between the OEMs and the OESs are in the
nature of “exclusive distribution agreements” and “refusal to deal” as contemplated under section
3(4)(c) and 3(4)(d) read with section 3(1) of the Act respectively.

All the present Opposite Parties have claimed IPR exemptions stating that on account of the
provisions of section 3(5)(i) of the Act, the restrictions imposed upon the OESs from undertaking
sales, of their proprietary parts to third parties without seeking prior consent would fall within
the ambit of reasonable condition to prevent infringements of their IPRs. OEMs had failed to
show that their restriction amounted to imposition of reasonable conditions, as may be necessary
for protection any of their rights. In the light of these observations, therefore, the Commission
will ascertain as to whether the exemption under section 3(5)(i) of the Act.

2. Whether the parties have violated the provisions of section 4 or not?

1
Competition Law by Richard Whish and David Bailey, Seventh Edition, Oxford University Press, p.
684.
According to the High court, there was an abuse of dominant position. On the issue of
leveraging, the Commission had held that since the car owners purchasing spare parts have to
necessarily avail the services of the authorized dealers of the OEMs, OEMs have used their
dominance in the relevant market of supply of spare parts to protect the relevant market for after
sales service and maintenance thereby violating Section 4(2)(e) of the Act. Further, in a vertical
integration set-up, vertical foreclosure effects are very likely to arise where a combined
undertaking controls essential facilities.2 Further, since the access to specialized diagnostic tools,
fault codes, technical manuals, training etc. is critical for undertaking maintenance and repair
services of such vehicles, the independent repairers are substantially handicapped from
effectively attending to the aftermarket requirements of automobiles due to the lack of access to
specialized diagnostic tools. Further, it may be noted that the facts pertaining to the present OPs
are substantially similar to the other OEMs considered in the Main Order. Applying the same
reasoning, therefore, the Commission is of the view that the conduct of the present OEMs is in
contravention of section 4(2)(e) of the Act. In view of the aforesaid, the Commission finds
Hyundai, Reva and Premier to be indulging in abuse of their dominant position thereby
contravening the provisions of section 4(2)(a)(i), 4(2)(c) and 4(2)(e) of the Act.

3. Whether the market is relevant or not?

The Commission is of the view that the relevant market definition with respect to the present
OPs would be the same as provided in the Main Order. Therefore the relevant market in the
present case would be as follows:

(i) manufacture and sale of cars in India,

(ii) sale of spare parts in India.

a. supply of spare parts, including diagnostic tools, technical manuals, catalogues etc. for the
aftermarket usage in India and;

b. provision of aftersale services, including servicing of vehicles, maintenance and repair

2
Competition Assessment of Vertical Mergers and Vertical Agreements in the New Economy, Gide Loyrette Nouel,
November 2001,
HELD

The commission held that the 3 OPS were liable under the section 3(4)(b), 3(4)(c), 3(4)(d), 4(2)
(a)(i), 4(2)(c) and 4(2)(e) of the Act. The Ops involved were directed to immediately cease and
desist from indulging in conduct which has been found to be in contravention of the provisions
of the Act and to make the spare parts and diagnostic tools easily available through an efficient
network. Altogether the penalty of 2500 crores were imposed on the parties.

CONCLUSION

I conclude by saying that in an exclusive network players cumulatively and collectively along
with their authorized dealer holding a dominant position require a detailed and a more elaborate
justification to show that their actions do not amount to a vertical restraint rather than a mere
single player with market power entering into such an exclusive agreement. The appellate court
partially upheld the decision of the high court and the case is pending in the Supreme Court.