India: Resale Price Maintenance : Has CCI Upped The Ante?

Last Updated: 27 November 2017
Article by Anshuman Sakle

Price fixing arrangements strike at the very heart of antitrust violations since they go against the accepted norm of price being determined by market forces. Such arrangements raise concerns in both horizontal and vertical markets. Under the scheme of the Competition Act, 2002 (Act), while horizontal pricing agreements (between competitors) are presumed to cause an appreciable adverse effect on competition (AAEC), there is no such presumption in the case of vertical agreements (between entities operating at different levels of the value chain), where the "rule of reason" approach is applied.

Interestingly, the treatment of vertical agreements and in particular resale price maintenance (RPM)1, has been long debated in many jurisdictions. Initially, antitrust authorities in mature jurisdictions were in agreement that RPM, in principle, was a per se violation and as such, not subject to any justification. However, acknowledging the need for relaxation, the US Supreme Court and the European Commission refrained from adopting a strict per se presumptive approach in cases of RPM to apply the "rule of reason" standard. On the other hand, national competition authorities in the European Union continue to take a hostile approach towards RPM without considering any pro-competitive effects that may arise. Moreover, in the Indian context, while the CCI had reiterated the statutory construct in dealing with RPM, by stating that AAEC needs to be determined on basis of the factors provided under Section 19(3) of the Act, until recently the treatment of RPM (including its scope and standard of proof) lacked clarity.

On 14 June 2017, the CCI imposed a penalty on Hyundai Motor India Limited (HMIL), engaged in the sale and distribution of Hyundai cars and its parts in India, for engaging in the practices of RPM2 and tying.3 Against the above backdrop, a discussion of this decision is not only interesting but also pertinent.

The CCI combined information filed against HMIL by authorised HMIL dealers, Fx Enterprise Solutions India Private Limited and St. Anthony's Cars Private Limited ("Informants"), alleging a contravention of Section 3 of the Act on the grounds that (i) HMIL had restricted the Informants from acting as dealers of competing brands by requiring prior consent of HMIL for investing in any new or existing business; (ii) HMIL had fixed the maximum retail price (MRP) of the cars (which included the pre-fixed margin of the dealers) and the maximum discount which could be offered by the dealers through its Discount Control Mechanism (DCM); and (iii) HMIL designated certain companies as the preferred suppliers of their complementary goods. The CCI found a prima facie case against HMIL and directed the Director General (DG) to specifically investigate the alleged contravention of Section 3 of the Act. On investigation, the DG concluded that HMIL had not only contravened the provisions of Section 3(4) but also Section 4 (relating to abuse of a dominant position) of the Act.

On merits the CCI's findings were as follows:

  1. Exclusive Supply Agreement and Refusal to Deal: The CCI observed that the requirement to get prior consent from HMIL for dealing with competing brands was not a prohibition. This was bolstered by the fact that over one hundred Hyundai dealers already operated other dealerships, without any objection from HMIL. Hence, the requirement did not amount to an exclusive supply agreement under Section 3(4)(b) and/or refusal to deal under Section 3(4)(d) of the Act.
  2. RPM: The CCI held that by designating the MRP and the maximum permissible discount which could be given by the dealers, HMIL had effectively set a minimum resale price, thereby engaging in RPM. The DCM was monitored by HMIL through its "mystery shopping agency", and the dealers were subjected to penalty for non-compliance with it. The CCI held that, such arrangement of setting minimum resale price and monitoring the same through a penalty mechanism, prevents the dealers from decreasing the sale prices, thereby stifling intra-brand competition. Further, higher prices resulting from RPM can decrease the pricing pressure on other competitors, marking a reduction in inter-brand competition as well.
  3. Tying:
    • CNG kits: The CCI held that cancellation of warranty for use of non-designated CNG kits may be objectively justified and did not amount to a contravention. Further, the CCI observed that HMIL may have a legitimate interest in ensuring that alternative brands of CNG kits are not used since ultimately HMIL would have to bear the costs of warranty.
    • Lubricants and Oil: HMIL mandated its dealers to purchase engine oil from its two designated vendors only, at the price indicated by HMIL. In case of non-compliance by the dealers, HMIL threatened to terminate the dealership agreement. The CCI noted that this resulted in price discrimination, without accruing any benefit to the dealers or the consumers, thereby contravening Section 3(4)(a) of the Act.
    • Car Insurance Services: The CCI noted that it was a business norm to have a tie-up with insurance companies and, hence, merely recommending that the dealers suggest designated insurance companies to consumers does not amount to a tie-in arrangement, since it is not mandatory for consumers to purchase the same.

On the procedural front, the CCI was of the view that the DG's investigation into contravention of Section 4 of the Act by HMIL went beyond the scope of investigation directed by the CCI and therefore deserved to be disregarded in entirety.

In terms of penalty, CCI, after considering mitigating factors such as proportionality, absence of supra-normal profits and voluntary introduction of a competition law compliance programme, imposed a penalty of INR 87 crore (approx. USD 13.54 million), i.e., 0.3 per cent. of the average turnover of HMIL in the past three years which accrued from the sale of motor vehicles.

Interestingly, the CCI has adopted a business friendly view and steered away from the approach in the Autoparts4 case by making a clear distinction between prudent/standard business practices and anti-competitive conduct. This is demonstrated through the CCI's approval of consumers' disentitlement to warranties for not using the manufacturer's designated products, thereby aiming to intervene only when necessary. Further, by adopting an "effects based approach", the CCI has affirmed the evolving undertone that exclusivity is not anti-competitive per se5 and may often be a fundamental part of doing business. Nonetheless, from an antitrust compliance perspective, this decision compels industry to review their vertical arrangements (with dealers/distributors/retailers) and re-visit seemingly routine business practices.

Being the first case to examine the issue of RPM in detail, the decision provides valuable insight in as much as it classifies the practice of setting a limit on maximum discount as RPM and demonstrates that any assessment in this regard should necessarily consider intra and inter brand competition as well as the factors stipulated under Section 19(3) of the Act. This decision evidences that the CCI does not deem it necessary to treat RPM cases in a different light, and similar to other vertical arrangements, will be tested on the touchstone of "rule of reason"- much like the approach adopted in mature antitrust jurisdictions. This is also the first instance where the CCI pursuant to the judgement in the Excel Crop case6 applied the principle of "relevant turnover" in the imposition of penalty. All in all, while this decision marks the CCI's first step towards providing clarity regarding RPM, it will be interesting to see the decision's impact on industry and the subsequent development of jurisprudence in this area, particularly with the introduction of the NCLAT7 as the appellate body.

* This piece was co-authored by Aishwarya Gopalakrishnan, Senior Associate. The authors were assisted by Twinkle Chawla, Associate.


1. RPM includes agreements and/or concerted practices, which have as their direct or indirect object the establishment of a fixed or minimum resale price or a fixed or minimum price level by the manufacturer which is to be observed by the buyer. Apart from explicit pricing arrangements, even sophisticated mechanisms such as fixed distribution margins, fixed levels of discounts, grant of rebates or reimbursement of promotional costs subject to the observance of a given price level, come within the purview of RPM.

2. Explanation (e) to Section 3(4) of the Act defines resale price maintenance to include "any agreement to sell goods on condition that the prices to be charged on the resale by the purchaser shall be the prices stipulated by the seller unless it is clearly stated that prices lower than those prices may be charged."

3. In re: Fx Enterprise Solutions India Pvt. Ltd. vs. Hyundai Motor India Limited (Case No. 36/2014) and St. Antony's Cars Pvt. Ltd. vs. Hyundai Motor India Limited (Case No. 82/2014).

4. Shamsher Kataria vs. Honda Siel Limited & Ors., Case No. 03 of 2011.

5. Dr. L.H. Hiranandani Hospital vs. Competition Commission of India & Another, Appeal No. 19 of 2014.

6. Excel Crop Care Limited vs. Competition Commission of India & Another, Civil Appeal No. 2480 of 2014.

7. National Competition Law Appellate Tribunal has replaced the Competition Appellate Tribunal.

This piece was first published in the August 2017 issue of The Practical Lawyer [(2017) PL (Comp. L) August 80]

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions