CCI junks abuse of dominance plea against Tata Motors, Tata Capital and Tata Motor Finance

The commission noted that the DG's findings on Tata Motors' abuse of dominance was solely based on communication between the company and Varanasi Auto Sales Limited.

The Competition Commission of India (CCI) on August 23 dismissed two abuse of dominance pleas against Tata Motors, Tata Capital, and Tata Motor Finance. The order was passed in two pleas filed in 2019 and 2020 by two commercial vehicles dealers of Tata Motors.

In the first complaint filed by a dealer called Varanasi Auto sales Limited , it was alleged that every authorised dealer of the company was obligated to raise finance/ loan from banks and/ or NBFCs such as Tata Capital and Tata Motor Finance.

The dealer further alleged that Tata Capital and Tata Motor Finance sanctioned finance in a discretionary manner, mainly relying upon the number of vehicles Tata Motors authorised its dealers to off-take for sale.

According to the dealer, the channel finance facility loan limit extended by Tata Capital and Tata Motor Finance to an authorised dealer was increased or decreased as per the targets set by Tata Motors rather than considering the financial strength of that authorised dealer or market demand.

The second complaint, filed by Kanchan Motors, alleged that Tata Capital and Tata Motor Finance were engaged in a tie-in arrangement by coercing the dealer to order the vehicle according to the list provided by Tata Motors via e-mail and later asking the dealer to paste the contents of the attachment without any changes on the dealer’s letterhead.

The CCI referred the cases to the Director General (DG) for an investigation.

Director General's findings:
Based on the documents submitted to him, the DG narrowed down the market to the manufacture and sale of commercial vehicles in India. The DG found that commercial vehicles are separate from other categories of vehicles owing to various factors. The DG found that Tata Motors was a dominant player in this segment, having a market share of about 42 to 45 percent between 2017 and 2022.

The DG found that Tata Motors was abusing its dominant position by coercing its dealers to off-take certain categories and number of vehicles and manipulating the demand of vehicles raised by the dealers. DG further found that the dealers were not only directed to meet the target but also warned by Tata Motors that non-compliance will sour the relationship between them. It was thus concluded that putting such a restrictive
obligation on the authorised dealers amounted to an abuse of dominant position in the relevant market.

Dealing with the allegation that Tata Motors imposes clauses on dealers asking them not to carry on any business, the DG found that such clauses merely required the dealer to obtain a no-objection certificate from it.

The DG, however, noted that Tata Motors has restricted dealers to their corresponding territories.

Tata Motors and the other companies filed their responses to the DG report.

CCI's findings:
The commission noted that the DG's findings on Tata Motors' abuse of dominance was solely based on communication between the company and Varanasi Auto Sales Limited. The commission thereafter looked at the testimonials given by other dealers from across the country on Tata Motors, most of which were contrary to what the dealer had claimed.

CCI further noted that Tata Motors had informed it that Varanasi Auto Sales Limited was in a precarious financial condition and had to terminate the dealership for this reason. Similarly, Kanchan Motors' dealership was not renewed due to its financial indiscipline, which had prompted State Bank of India to issue stop supply notice to Tata Motors.

Thus, the CCI disagreed with the DG and concluded that Tata Motors was not abusing its dominant position in the market.

On the aspect of imposing territorial jurisdiction, CCI noted that no dealer other than the two complaining ones had alleged that the company was imposing unfair territorial restrictions to dealerships.

The CCI thus disagreed with the DG on this aspect too and dismissed the plea against all the companies.