India's antitrust body on Thursday said it had ordered an investigation into how Maruti Suzuki, the country's biggest car maker, controlled discounts its dealers could offer.
Car makers at times set a limit on discounts to ensure there is no price war among dealers but law says the practice, described as "resale price maintenance", is prohibited if it causes "appreciable adverse effect on competition in India", reported news agency Reuters.
The Competition Commission of India (CCI), in a 10-page order, said an investigation of Maruti’s arrangement with its dealers was justified, news agency PTI reported.
"Agreements restraining competition are generally made in smoke filled rooms and therefore it is difficult to find formal/ written agreements. It is with this objective that the (Competition) Act has stipulated a wider definition of agreement to catch hold of such anti-competitive conduct,” said CCI, rejecting the company’s submission that it had no agreement to control discounts.
Maruti, majority-owned by Japan's Suzuki Motor Corp , did not immediately respond to a request for comment. The company commands a 51 per cent market share in India. It sold 1.73 million passenger vehicles in the year to March and has nearly 3,000 dealers in the country.
(With inputs from Reuters and PTI)