India Flexes Anti-Competition Laws. Malaysia?

From the The Economic Times India :
NEW DELHI: International car makers, Honda, Hyundai and Volkswagen, have come under the scanner of the competition watchdog CCI for abusing their dominant market position by selling auto parts to customers at high prices.

The Competition Commission of India (CCI) has asked its Director General (Investigations) to probe a consumer's complaint against the car makers, who allegedly abuse their dominant position by making available spare parts only through their authorised dealers, who in turn sell them on high rates.

"This practice by the international car makers does not give the consumer a fair price advantage as he has no choice but to buy the spare parts from authorised dealers. Prima facie it makes a case and the DG has been ordered to probe the matter further," an official told PTI.

The DG has been asked to submit his report on the findings within 45 days.

While Hyundai Motors denied having received any communication from the CCI, emails sent to Volkswagen and Honda remained unanswered.

Normally, auto spare parts from Indian car makers are available with any retailer, not necessarily authorised, but the case is not the same with international car makers.

Consumers are stuck after having bought a car from the international car makers, according to the complainant, who filed the case under section 4 of the Competition Act, 2002.

The Commission, which became fully functional in 2009, with the appointment of a chairman and six members, at present has the power to check anti-competitive agreements and abuse of dominant position, drawn from Sections 3 and 4 of the Competition Act, 2002.

Beginning June, 2011, the Commission will also have the powers to check high-voltage mergers and acquisitions.

An anti-competition practices watchdog is certainly something that many of us would appreciate on this side of the world! The scenario above is not too unfamiliar to many of us. In European Union member countries, I understand that manufacturers are obligated to make proprietary engine computer diagnostic tools available for purchase by independent garages. The way the EU court sees it, the practice of making proprietary diagnostic tools available only to authorized dealers is against the interest of consumers, by limiting their options and thereby limiting competition in the market place.

Presently, Malaysia does not have any Competition Law, although the Malaysian Competition Act 2010 was gazetted last year, it is only expected to be implemented no earlier than January 2012. How much bite does this new law have is yet to be seen. Looking beyond the car industry, we can see the blatant price fixing / cartels active in our local market. Take the telco industry for example - over in Singapore, you can sign up for a talk / data plan for minimal fee with a minimum 2 years contract period and get a phone for free. Here, we still have to pay a couple of thousands for an iPhone ON TOP of your contract plan. I was informed by a colleague from the telco sector that in Europe, in order to get an operating license, service providers are required to lower their prices periodically. And that it is common knowledge that some form cartel like price fixing exist between the top-2 players. But you wouldn't expect the government to do anything about it, especially if you already know who is behind these companies and what a huge cash cow both these companies are to the government. It's a similar thing with other retail goods. We all know that it is cheaper to do your shopping in neighbouring Bangkok or Singapore. I hardly shop for clothings here anymore. Instead I just travel to Bangkok's famed Platinum Mall with an empty suitcase and return full. As for luxury labels you can get much better offer during the annual Singapore sale, while you have a holiday there of course.

I was told by another friend in the retail sector that one of the reason luxury labels are so expensive here is because these good are come from largely the same importer, which are often linked to the same royal families and typical connected few. Of course, currency exchange is also another factor.

Anyway back to the impact of competition laws on the automotive industry - it is left to be seen how much bite will the new law have, as full implementation will touch some pretty raw nerves of our local politics - namely the national car policy and NEP, both are subjects heavily flogged by UMNO politicians to fish votes, and both are clearly against international competition laws. Then there is the OSA, without having the OSA repelled and replaced with a Freedom of Information Act, a competition law would have little bite.

A Competition Law in the automotive industry would also mean that car dealers can now sell multiple brands. Presently, big names like Toyota and Honda often force dealers, especially the newer / smaller ones to accept conditions whereby only a single brand can be sold by the dealers. But of course dealers go around it by establishing separate companies. Still, the ownership of multiple brand dealerships can be a touchy subject in their relationship with car distributors representing the manufacturer principal. Smaller car manufacturers have less leveraging power, and thus Federal Auto Holdings is able to represent both Volvo, Mitsubishi and VW.

In the US, the maxim of a free market - dealers can sell and even service multiple brands, sometimes even brands that are in direct competition, all from the same outlet. Of course the showrooms would still be separated, but they would all still be in a same main building.

Car companies will also have to make repair manuals and other technical information available to public, as well as purchase of their diagnostic tools.

The more you know about consumer protection regulations that exists in other countries, the more you realize how much we are being screwed over and under. And why things just keep getting more and more expensive over here.

Further reading :
Competition Law

Antitrust: Commission adopts revised competition rules for the motor vehicle sector: frequently asked questions

Antitrust: Commission ensures carmakers give independent garages access to repair information