Indian Journal of Law and Legal Research Volume VI Issue I | ISSN: 2582-8878

CASE ANALYSIS: HYUNDAI MOTOR INDIA LTD VS

Adv. Divya. S, Pursuing post-graduation in Law at Christ University, Bangalore, Karnataka

1. BACKGROUND

On January 17, 2011, Mr Shamsher Kataria, a resident of New Delhi, filed a complaint with
the Competition Commission of India (CCI) under Sections 3 and 4 of the Competition Act,
2002, specifically Section 19(1)(a). Mr. Kataria alleged that three automobile manufacturers,
namely Honda Siel Cars India Limited, Volkswagen India Private Limited, and Fiat India
Automobiles Limited, were involved in the abuse of their dominant positions and were engaged
in anti-competitive activities.

The Additional Director General provided a report to the Competition Commission of India
(CCI), noting that they had identified similar practices in other car manufacturers in India,
particularly in the domains of after-sales service and the procurement of spare parts. As a result,
the Additional Director General sought the CCI's permission to broaden the investigation's
scope to include these other car manufacturers for a more comprehensive examination.

The CCI issued an order considering the request of the Additional Director General, which
allowed the expansion of the scope of the investigation.

Following the CCI's order dated April 26, 2011, the Director General issued a notice dated May
4, 2011, to Hyundai Motor India Limited under Section 36(2), read with Section 41(2) of the
Competition Act, 2002.

2. FACTS OF THE CASE

The case revolves around allegations of anti-competitive conduct by Hyundai Motor India Ltd.
The central issue in the case was the practice of resale price maintenance (RPM), where
Hyundai allegedly imposed certain restrictions on its authorised dealers regarding the pricing
of its vehicles.

Resale Price Maintenance (RPM) is a practice where a manufacturer or supplier fixes or sets
the resale price at which retailers can sell their products. In this case, Hyundai was accused of

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imposing pricing restrictions on its authorised dealers, effectively preventing them from
offering discounts or setting their resale prices below a certain level.

A complaint was filed with the Competition Commission of India (CCI) on Hyundai's that its
RPM practices were anti-competitive and violated India's competition laws. The complainant
contended that these practices harmed competition in the automobile market and negatively
affected consumers.

3. ANALYSIS

3.1 Decision of Competition Commission of India

The Competition Commission of India (CCI) has determined that Hyundai Motor India Limited
(HMIL) violated the Competition Act of 2002. HMIL imposed certain conditions on its dealers
that resulted in Resale Price Maintenance for their passenger cars. These conditions included
monitoring maximum discount levels through a Discount Control Mechanism and obliging
dealers to use recommended lubricants while penalising them for non-compliance. The CCI
took action following a complaint from dealers associated with HMIL, specifically Fx
Enterprise Solutions India Pvt. Ltd. and St. Antony's Cars Pvt. Ltd. As a result of this
investigation, the CCI issued a cease and desist order against HMIL and imposed a penalty of
Rs. 87 crore for their anti-competitive conduct, which equates to 0.3% of HMIL's average
relevant turnover over the previous three years. Notably, the appropriate turnover calculation
solely considered revenue from the sale of motor vehicles.

3.2 Analysis

The CCI's decision in the Hyundai case regarding RPM differed from its previous decisions. It
lacked a thorough examination of the potential advantages of implementing RPM for Boosting
Car Sales, where CCI held that the discount control mechanism was against competition Law.

It's important to note that competition law is designed to protect and promote competition in
the market. In the context of RPM, there can be both pro-competitive and anti-competitive
effects, depending on the specific circumstances. RPM can enhance competition by ensuring
all retailers have an equal opportunity to sell a product and preventing price wars that may
harm smaller businesses. On the other hand, RPM can also be used to stifle competition by
reducing price competition and limiting consumer choices.

The CCI's approach in the Hyundai case may have been more rigid or one-sided, presuming
that RPM is inherently anti-competitive without a comprehensive assessment of its competitive

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effects. This could be seen as inconsistent with the CCI's broader decisional practice on RPM,
where it may have taken a more balanced approach, considering both the potential benefits and
harms of RPM.

It's worth noting that competition law can evolve, and enforcement agencies may refine their
approach to specific practices based on their experience and evolving legal standards. If there
are concerns about the consistency or fairness of the CCI's decisions regarding RPM,
stakeholders, legal experts, and the CCI itself may engage in discussions and legal challenges
to clarify and potentially modify the CCI's approach.

3.3 Decision of NCLAT

The Delhi bench of the National Company Law Appellate Tribunal (NCLAT) made a
significant decision involving Hyundai Motor India Ltd and the Competition Commission of
India (CCI). The NCLAT (National Company Law Appellate Tribunal) nullified the Rs 87 crore
penalty imposed by the CCI (Competition Commission of India) on Hyundai for suspected
anti-competitive behaviour.

3.4 Analysis

In its decision on September 19, 2018, the NCLAT emphasised the powers of the CCI regarding
the investigation report prepared by the Director-General (DG). The tribunal clarified that the
DG's report is essentially an opinion to assist the CCI. The commission can refer to the report
submitted, but it is not mandated to follow it.

While the Commission can refer to the DG's report, it must independently apply its judicial
mind to reach any conclusions.

The CCI had imposed the Rs 87 crore penalty on Hyundai, alleging anti-competitive behaviour
under Section 3 and Section 4 of the Competition Act. However, the NCLAT, upon review,
noted that the CCI had excessively relied on the DG's investigation report and had essentially
reiterated the DG's observations without conducting an independent analysis.

The NCLAT pointed out that the CCI failed in its obligation to independently establish its
rationale by considering the elements laid out in Section 19 of the Competition Act, 1962,
which outlines the factors the Commission must take into account. This decision is seen as a
positive step in ensuring that the CCI operates within the legal framework of the Competition
Act.

The ruling also establishes a "test of conscience" for the Commission, emphasising that the

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CCI's reliance on the DG's report should be for reference purposes and not unduly influence
the Commission's opinion. The NCLAT's decision in the Hyundai case drew from a prior
Supreme Court judgment in the CCI vs. Coordination Committee of Artistes and Technicians
of West Bengal Film and Television case. In this earlier case, the Supreme Court highlighted
the necessity for the DG and the CCI to define the "relevant geographic market" and "relevant
product market" when dealing with competition law matters before making any determinations.
In the Hyundai case, the NCLAT noted that the DG and the CCI had overlooked these aspects
and, consequently, ordered the company to receive a refund of any amount deposited.

In essence, this ruling underscores the significance of quasi-judicial bodies like the CCI
adhering to their mandated responsibilities. It signals that the NCLAT will maintain a close
watch over the actions of the Commission and stress the importance of grounding every
decision on specific evidence.

CONCLUSION

Therefore, competition authorities, including the CCI, should conduct a thorough analysis of
each case to determine whether RPM practices are anti-competitive or have legitimate
justifications. This typically involves an assessment of market dynamics, the specific conduct
of the parties involved, and its impact on competition and consumers. Whereas the NCLAT set
a "test of conscience" for the Commission, emphasising the need for independent reasoning
and ordered a refund of any deposited amount by Hyundai. In summary, this ruling underscores
the importance of quasi-judicial bodies like the CCI adhering to their statutory responsibilities
and ensuring that their actions are evidence-based.

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