Exclusive Motors Pvt Ltd vs Automobili Lamborghini

By:-Tarush

In the Competition Commission of India

NAME OF THE CASEExclusive Motors Pvt Ltd vs Automobili Lamborghini
CITATIONCase No. 52 of 2012
DATE OF THE Judgement6/11/2012
InformantExclusive Motors Pvt Ltd
Opposite PartyAutomobili Lamborghini
BENCH/JUDGEAshoka Chawla, M.L Tayal, R. Prasad, H.C Gupta, Geeta Gouri, Anurag Goel, Justice S.N Dhingra  
STATUTES/CONSTITUTION INVOLVEDCompetition Act,2002
IMPORTANT SECTIONS/ARTICLESSection 3,4,4(2)(c),3(3)(a),3(4)(c),26,19(1)(a),19(4) of competition act,2002
  

ABSTRACT

The claim of “single economic entity” is a defense often raised to resolve dissatisfaction with anti-competitive transactions. Adult jurisdiction in the EU and the United States has had many opportunities to explore and develop the contours of these joint defenses. Indian competition regulators had limited opportunities to deal with the concept of “single economic agent”, but enacted national competition law, and Indian legislators were accredited with peers. Had the advantage of being able to integrate into economic principles. A unit or single economic entity of the Competition Law,2002.

INTRODUCTION

The competition law framework was mainly proposed by the Senior Committee (Raghavan Committee) appointed by the Government of India to advise on modern competition law in line with international development. The Raghavan Commission noted that the contract introduces unreasonable restrictions on competition and is considered illegal only if the contracting parties participate in competition or potential competitive activity.

Section 3 of the Competition Law dealing with anti-competitive contracts is that such contracts are made between candidates or potential competitors for whom it is understood that potential competitors can participate in the same type. It is based on the foundation that can be done. Of activity. The principle of “single economic entity” has evolved by case law, as well as mature jurisdiction, competition law allows companies or companies under joint ownership or control to be “competitive” or “potential competitors” It was constructed with the idea that it would not be considered.  Given the early stages of Indian competition law, the precedent for the concept of a” single economic entity “has been extremely restrictive.

BACKGROUND OF THE CASE

The current case was submitted by Exclusive Motors Pvt. Restrictions alleged to specifically violate Sections 3 and 4 against Automobili Lamborghini SpA (“Counterparties”) under Section 19 (1) (a) (“Law”) of the 2002 Competition Law (“Information”) Person “) of the law.

 Sources claimed to be in the business of importing and selling “super sports cars” on the territory of Delhi. On the other side is a well-known manufacturer of super sports cars. The opposite party is a subsidiary of Audi Ag, which is part of the Re-Volkswagen Group. It is mentioned that the Volkswagen Group owns most of the luxury car brands such as Audi, Seat, Lamborghini, Volkswagen, Skoda, Bentley, Bugatti and Porsche.

FACTS OF THE CASE

Exclusive Motors Pvt. Limited is a South Delhi based supercars selling company whose primary business is, to make agreements with the Super Sports Car Companies like Lamborghini, Aston Martin, Bentley etc. and buy cars from those companies and sell it to the Customers throughout India through their dealerships. For Indian sales-based promotions costs were borne by ExMo.
In the year 2011, Volkswagen India, another sub-company belonging to the Volkswagen Group was launched in India to sell cars under the Volkswagen badge.

Thus, Volkswagen dealerships were opened, and Lamborghini cars were decided to be sold through these dealerships as against the existing ExMo dealerships. Now, in this notice period, the importing price of Lamborghini cars was much higher to ExMo against the prices bought by Volkswagen India. ExMo claimed this as a price discriminatory policy and violation of section 3&4 of competition act.
The agreements of Lamborghini with Volkswagen India were suspected to be anti-competitive and contravening Section 3 as they directly determined the sale and purchase price of the Lamborghini cars.

ISSUE RAISED BEFORE THE COURT

  1. Whether Volkswagen India and Automobili Lamborghini be considered as separate enterprises although they both belong to Volkswagen Group under Section 2 (h)?
  2. Can an internal agreement between the two subsidiaries belonging to the same group be considered as an agreement for the purpose of Section 3?
  3. Did Does Automobili Lamborghini deny market access of its cars because of its agreement with Volkswagen India?

ARGUMENTS FROM THE INFORMANT’S SIDE

  1. The informant, therefore, alleged contravention of section 3 and 4 of the Act. The agreements of the opposite party with its group company and its Partner are alleged to be anti-competitive and in contravention of section 3 as they directly determine the sale and purchase price of the car.
  2.  Also, the exclusive distribution agreement between the opposite party and its group company Volkswagen India is alleged to violate section 3 of the Act since it excluded the informant and other prospective dealers to become the importers and dealers of opposite party products. Regarding section 4, the informant considered the relevant market as the market for ‘distributing super sports cars in India’.
  3. The informant stated that the opposite party held 52% share in this market individually while with other Volkswagen group cars, its share amounted to 60%. Therefore, the opposite party violated section 4 and by imposing unfair and discriminatory conditions and section 4 by denying market access to the informant. On the aforesaid basis, the informant prayed the Commission to direct an inquiry under section 26 of the Act into the anti-competitive practices adopted by the opposite party and Volkswagen India.

ARGUMENTS FROM THE OPPOSITE PARTY’S SIDE

  1. The informant paid attention to the size of the opposition and did not compare the size with other competitors. This information does not mention the economic power of the other party, nor does it mention the commercial advantage that the other party has over the competitor. It was selling more cars than the opposition. He increased sales per opposition.

    Other competitors with some presence in the Indian market include the Aston Martin Mask Latti Bugatti and the Gunperuto Apollo. Brands such as Aston Martin, Ferrari, and Lamborghini form part of this market, but the presence of these vehicles in India is very small, so it cannot be said that they are all dominant when it comes to market share. In terms of economic power and resources, all competitors are in the same position, and not all competitors have a commercial advantage over others.
  2. Therefore, it cannot be said that the opponent was a dominant company in the Indian super sports car market companies could open offices in any country and have the right to import cars directly through their offices or form subsidiaries to import cars from other countries. No cheating and no competition issues.
  3.  Since the number of cars sold in India is very small, there is absolutely no need for the other party to have a lot of income, and it is not a reason to start a lawsuit if the opposing party himself wants to import Indian cars through a group company. Even if the opponent is the dominant player, even on the opposite side. The opposition offered the informant to terminate the existing contract and enter into a new contract with its group company, Volkswagen India.

RELATED PROVISIONS

  1. Section 3

Anti-competitive agreements.— No enterprise or association of enterprises or person or association of persons shall enter into any agreement in respect of production, supply, distribution, storage, acquisition or control of goods or provision of services, which causes or is likely to cause an appreciable adverse effect on competition within India.

Directly or indirectly results in bid-rigging or collusive bidding, shall be presumed to have an appreciable adverse effect on competition: Provided that nothing contained in this sub-section shall apply to any agreement entered into by way of joint ventures if such agreement increases efficiency in production, supply, distribution, storage, acquisition or control of goods or provision of services.
resale price maintenance shall be an agreement in contravention of sub-section if such agreement causes or is likely to cause an appreciable adverse effect on competition in India.

  • Section 4

Abuse of dominant position.—No enterprise shall abuse its dominant position.

Explanation .—For the purposes of this section, the expression—«dominant position» means a position of strength, enjoyed by an enterprise, in the relevant market, in India, which enables it to—operate independently of competitive forces prevailing in the relevant market; or affect its competitors or consumers or the relevant market in its favour; «predatory price» means the sale of goods or provision of services, at a price which is below the cost, as may be determined by regulations, of production of the goods or provision of services, with a view to reduce competition or eliminate the competitors.

  • Section 26

Procedure for inquiry on complaints under section 19.—On receipt of a complaint or a reference from the Central Government or a State Government or statutory authority or on its own knowledge or information, under section 19, if the Commission is of the opinion that there exists a prima facie case, it shall direct the Director-General to cause an investigation to be made into the matter.

The Commission shall forward a copy of the report referred to in sub-section to the parties concerned or to the Central Government or the State Government or the statutory authority, as the case may be.
If, after hearing the complainant, the Commission is of the opinion that further inquiry is called for, it shall direct the complainant to proceed with the complaint.

JUDGEMENT

About the question of whether EXMO as Lamborghini is considered another entity, the Committee requested interpretation of section 2 of competition 2 2002. Article 2 says: “Companies mean people or A. Government director, or, for the production, storage, supply, distribution, or in which the activities are committed. Or I am committed to this … here, it consists of one or a company. Therefore, at least two companies that enter the Agreement To comply with the discussion of violations of section 3 of the needs of the law, these companies must be two separate things.

In this case, both Volkswagen India and Automobili Lamborghini belong to the same group or company, or Roading Group. Therefore, both the company should be understood as a company in this context, but they are separate corporations and the so-called contracts between both are not the case of the way. In addition, the universal teaching of a single economic entity also applies to this, and this will strengthen this debate.

This part of the sentence responds to two questions, whether the company itself is configured as the same company in the eyes of the Competition Committee. As a contract of a third part of the action, the eyes of the Competition Committee. Next, in this context, it was determined that the potential for the applicability of Section 4 in this context has been Violated the applicability of section 4 and has made an abuse of superiority.

Volkswagen India and Lamborghini belong to the same group, so they are part of a single economic entity and do not have a casting problem.

CONCLUSION

The concept of single economic unity by the objective of cartelization is only possible if the two entities are completely relevant. In this case, they are in the same group part of a single economic entity and no questions about cartelization; It is only an internal arrangement of a group from the business perspective and therefore does not apply as an agreement.

 In this case, although the concept of the single economic entity has brought something clear, the ambiguity of the perspective of the competition board still exists as internationally about it. Therefore, a vertical agreement can only exist between entities that are not part of the same group or the economic entity. Therefore, the search must be based on the premise that your authorized manufacturers and service providers are separate companies. 

REFERENCES

  1. https://indiankanoon.org/doc/114985492/
  2. http://www.legalserviceindia.com/legal/article-2890-are-lamborghini-and-volkswagen-india-are-separate-entities-in-the-indian-competition-regime-.html
  3. https://indiankanoon.org/doc/1153878/
  4. https://indiankanoon.org/doc/1780194/
  5. https://www.cci.gov.in/sites/default/files/Case52of2012_0.pdf