Hyundai gets interim relief. SC stays CCI’s Rs. 420 crore penalty

The Supreme Court gave relief to Hyundai Motors India Limited w.r.t the penalty imposed by CCI for indulging in anti-competitive trade practices. Find out why Hyundai Motors came under the radar.

The Supreme Court on November 17, 2018 passed an interim order staying the judgment passed in July 2018 in the appeal by Hyundai Motors India Limited about the Rs. 420 crore penalty imposed on it by the Competition Commission of India (CCI) for taking part in anti-competitive practices, including lack of standardisation of spare parts and allowing original equipment suppliers to sell spare parts in the open market without any restrictions.

Senior counsel P Chidambaram representing Hyundai Motors India Limited sought a stay on the grounds that the Apex Court had, in other appeals by Toyota, Ford and Nissan regarding the same or similar issue were granted interim relief.

Hyundai was penalized 2% of its annual turnover in India for the financial year 2009-10, 2010-11 and 2011-12 by CCI. Last month, Hyundai approached the National Company Law Appellate Tribunal (NCLAT) seeking a stay on the penalty imposed by CCI but the Tribunal refused to give any relief to the car maker. Hyundai then approached the Madras High Court challenging the jurisdiction of the CCI to expand the scope of the Director General’s investigation, which got dismissed by the single Bench and later by the Division Bench on appeal. So, Hyundai Motors India Limited sought relief from the hefty penalty at the Supreme Court.

As per the Act, genuine spare parts of automobiles manufactured by these companies should be made available in the open market for independent mechanics. The CCI had passed the above order as Hyundai Motors India Limited had violated Section 3(4) in the Competition Act, 2002 (‘the Act’) which disallows any agreement amongst enterprises or persons at different stages or levels of the production chain in different markets which causes or is likely to cause an appreciable adverse effect on competition in India. Hyundai, together with Mahindra Reva and Premier cars, fixed the sell out price against the Act. The CCI also held there was an infringement of Section 4 of the Act, as Hyundai abused the dominant position they held in the market.

Takeaways:

  1. CCI had also found that Mahindra Reva Electric Vehicles (a subsidiary of Mahindra and Mahindra) and Doshi Holding promoted Premier in violation, same as Hyundai. But, only Hyundai Motors India Limited was penalised by CCI.
     
  2. Section 27(b) of the Act prescribes not less 10% of the total turnover of the company for violation of Section 3 and 4 of the Act. In the case of Excel Crop Care Ltd. v. Competition Commission of India, (2017) 8 SCC 47, the Supreme Court clarified that the turnover is calculated as per entity’s turnover pertaining to products and services that have been affected by such contravention
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