On August 23, 2023, the CCI dismissed the complaints filed by Ms. Neha Gupta and Mr. Nishant P. Bhutada (collectively ‘Informants’) alleging the contravention of the Competition Act by Tata Motors Ltd. and others (collectively ‘Tata Motors’). [1]

The Informants alleged that Tata Motors violated provisions of Sections 3(4) and 4 of the Competition Act based on the following conduct:

i.    Tata Motors coerced its authorised dealers to order vehicles arbitrarily;

ii.   The agreement executed between Tata Motors and the dealers was onerous as it restricted the dealers from starting, acquiring, or engaging in any new business even if unrelated to the automobile industry;

iii.  The dealers were not allowed to operate outside their respective territories; and

iv.  The dealers were obliged to raise finance only from Tata Motors, which arbitrarily decided the interest rate, penal interest, other illegal charges, and adjustments on the channel finance loan facility.

The CCI found the case to be fit to be investigated by the DG for abuse of dominance and imposition of vertical restraints through – (i) Tata Motors’ conduct with respect to commercial vehicles; and (ii) clauses in the dealership agreements between authorised dealers and Tata Motors.

The DG investigated the matter and concluded that Tata Motors’ conduct was an abuse of dominant position under Sections 4(2)(a)(i), 4(2)(d), and an imposition of vertical restraints under Section 3(4)(c) of the Competition Act. The CCI, in its analysis, concurred with the relevant market defined by the DG (market for manufacture and sale of commercial vehicles in India) and found Tata Motors to be dominant in the relevant market from financial years 2017 to 2022 based on its market share.

The CCI, while dealing with the issue of Tata Motors abusing its dominance, found that the Informant’s dealerships were terminated because of their poor financial conditions, inability to maintain stocks etc. The CCI noted that during the dealership period, no such allegation was raised by the two dealers. Further, the CCI considered the comments of other dealers who submitted that there have been no such instances where Tata Motors engaged in such unfair practices with them. Based on this, the CCI concluded that Tata Motors did not coerce its dealers to offtake vehicles as per its demands and accordingly did not violate the provisions of Section 4(2)(a)(i) or Section 4(2)(d) of the Competition Act.

The CCI noted that dealers can start or acquire new business only after taking a ‘no objection certificate’ (‘NOC’) from Tata Motors. However, in the absence of anything on record to show that any NOC has been withheld, the CCI held that Tata Motors cannot be held to be in contravention of the provisions of Section 4(2)(a)(i) or Section 4(2)(c) of the Competition Act.

On territorial limitation, the CCI found – from the dealership agreement of one of the Informants – that dealership agreements executed post-2016 allowed dealers to engage in active sales outside the allocated territory with the consent of Tata Motors. Further, no penalty has been imposed in case of breach of the territory clause. The CCI also noted that restrictions on active sales outside the designated territory were imposed to ensure that dealers do not free-ride another dealer’s marketing and investments. Hence, the CCI found that the condition imposed by Tata Motors limiting territory was not in violation of Section 3(4)(c) of the Competition Act.

Accordingly, the CCI held that no case of contravention of the provisions of Sections 3 and 4 of the Competition Act is made out against Tata Motors.

^[1]       Neha Gupta v. tata Motors & Ors., Case No. 21 of 2019 and Case No. 16 of 2020.