Fx Enterprises v. Hyundai: Guilty Without (Rule of) Reason?

Abstract

The CCI’s decision in Hyundai Motors that the imposition of a discount control provision in their dealership agreements constituted unlawful Resale Price Maintenance (RPM) is the first and only case till date where the CCI found a violation of law with respect to RPM. This order was widely appreciated by Competition Law practitioners and scholars for providing “valuable insight(s)” into the law of Resale Price Maintenance. However, the CCI’s decision was overturned on appeal for not containing sufficient evidence that there had been an adverse effect on the market. The CCI has filed an appeal against this order to the Supreme Court of India, where the matter is currently pending. This paper analyses the landmark Hyundai case in light of the CCI’s broader decisional practice on RPM and finds that unlike in other cases of RPM, the CCI did not examine possible pro-competitive reasons for why Hyundai imposed a discount control mechanism, including the need to compensate dealers for providing high quality retail services. These services are particularly essential for the sale of cars as there is evidence that customers distinguish between brands based on dealership quality. By ignoring the possible benefits of RPM, the CCI presumed that the very existence of the discount control measure was unlawful, without the need to examine its competitive effects. This goes against the letter and spirit of the law on RPM and is contrary to the CCI’s own decisional practice. This paper highlights the problems with the CCI’s reasoning in this order and the broader inconsistencies in its analysis across different RPM cases with a view to ensuring that the CCI avoids similar analytical errors in its ongoing investigations into RPM allegations against other automobile companies.