A Tata Motors emblem is pictured exterior the corporate showroom in Mumbai. File
| Photo Credit: Reuters
The Competition Commission of India (CCI) on Wednesday dominated that Tata Motors Limited has not violated the provisions of the Competition Act, 2002.
The honest commerce watchdog’s essential verdict brings to shut a contentious investigation, placing the auto large underneath intense scrutiny.
Accusations
At the centre of the controversy had been two long-standing authorised sellers of Tata Motors. Their terminated or non-operational dealership agreements led them to file formal complaints towards Tata Motors.
The accusations included Tata Motors abusing its dominant place by dictating automobile off-take preferences to sellers.
The firm was additionally accused of imposing sure restrictive clauses of their dealership agreements, notably, the requirement for sellers to acquire a No Objection Certificate (NOC) earlier than venturing into or buying new companies.
Another level of competition was Tata Motors’ alleged vertical restraint on its sellers, proscribing them from promoting autos exterior their designated territory.
Post-receipt of these complaints, the Commission famous prima facie infraction of competitors regulation and directed its investigation arm —i.e. the Director General (DG) to probe deeper into the allegations.
DG’s findings
The DG concluded that Tata Motors did impose off-take necessities and territorial restrictions on its sellers. However, the corporate was cleared of the NOC-related allegations by the DG.
Overruling the DG’s findings, the CCI in its ruling famous that the alleged misconduct of Tata Motors didn’t show any evident detrimental impression on competitors inside the nation.
Crucially, the off-take requirement allegations had been discovered to be contradicted by testimonies from a number of different Tata Motors’ sellers.
The Commission additionally highlighted the truth that the informants, having been long-term sellers, had by no means raised such issues up to now.
On the difficulty of NOC requirement for sellers, the CCI concurred with the DG’s evaluation.<SU>The mere inclusion of such a clause, with out proof of it being unjustly enforced, was not deemed adequate for establishing violation of the regulation, famous CCI in its ruling.
Relief for firm
The most important level of aid for Tata Motors was the CCI’s stance on the territorial restriction allegations.
The CCI reasoned in its order that with out substantial proof to reveal considerable adversarial impact on competitors – precise or possible, it was inconceivable to establish the real-world implications of such a coverage on competitors.
“The Commission further notes the submissions of Tata Motors that it imposed restrictions on active sales outside the designated territory to inter alia ensure that dealers do not free-ride another dealer’s marketing and investments, incentiviszing dealers to invest in the dealership, enhance intra-brand competition, etc.
In this regard, the Commission observes that while arriving at a finding of contravention of Section 3 (4) of the Act, it is imperative to carry out an assessment of the factors mentioned under Section 19(3) thereof to determine whether the alleged vertical restraint results in or likely to result in an appreciable adverse effect on competition or not.
In the absence of any factual basis or foundational evidence in this regard brought out by the DG, the Commission is unable to return a finding of appreciable adverse effect on competition arising out of the impugned conduct,” noticed CCI whereas closing the case.
Samir Gandhi, Co-Founder, Axiom5 Law Chambers, instructed businessline, “The CCI’s order is based on a thorough analysis of facts and a detailed assessment of the applicable law. The order reflects the CCI’s pragmatic approach when dealing with contractual disputes which do not involve any competition law infringement”.
