Honda Motorcycle faces crackdown in India, here is why

Fair trade regulator CCI today ordered an investigation against Honda Motorcycle and Scooter India (HMSI) for various anti-competitive provisions in its agreement with dealers. It was alleged that HMSI had perpetuated tie-in arrangements, imposed resale price maintenance and maintained a discount control mechanism through the standard form of dealership agreement.

After finding prima-facie evidence of competition norm violations, the watchdog has decided to carry out a detailed probe against the company.The Competition Commission of India (CCI) noted that prima -facie a case of contravention of Section 3 and 4 of the Competition Act is made out against the company. Section 3 and Section 4 pertains to anti-competitive agreements and abuse of dominant market position, respectively.

The CCI decision for a detailed probe by its investigation arm Director General (DG) has come on a complaint by an Aurangabad-based auto rickshaw dealer of HMSI, the opposite party.

For the case, the CCI has considered 'market for manufacture and sale of scooters in India' as the relevant one.

One of the allegations was that the company had abused its dominant position and imposed unfair conditions in the purchase or sale of goods.

Citing certain data, the regulator said that at prima-facie stage it suggests that the company enjoys a dominant position in the relevant market.

Further, the watchdog noted that it is prima-facie satisfied that the restrictions imposed by HMSI for sale of oil, lubricants and batteries are "unfair".

Among others, mandatory requirements imposed by HMSI on its dealers for purchase of oil and consumables, genuine accessories, advertising services, merchandise items, batteries, insurance and finance options, from designated sources appear to be in the nature of anti-competitive restraints.

"Nothing stated in this order shall tantamount to expression of final opinion on the merits of the case and the DG shall conduct the investigation without being swayed in any manner whatsoever by the observations made herein," the CCI said.