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India joins the antitrust party, fining auto groups $425 million

Infrastructure And General Economy As Modi Pledges To Unclog NationInfrastructure And General Economy As Modi Pledges To Unclog Nation
Sacred milch-cows: India's drivers, like China's, have been milked by local and foreign carmakers.Bloomberg via Getty Images

India has followed China in doling out huge fines to foreign and local carmakers for fixing prices for spare parts and after-sales service.

The Competition Commission of India said it would fine 14 car makers a total of 25.5 billion rupees ($422 million), each one being fined around 2% of their respective annual revenue in India, the Press Trust of India reported Tuesday.

The list of companies includes both local giants Tata Motors and Mahindra & Mahindra, as well as the local arms of Daimler AG (DDAIY) Mercedes-Benz, Volkswagen AG (VLKAY), General Motors Corp. (GM), Toyota Motor Co. (TOYOF) and Honda Motor (HNDAF).

The fined groups “imposed absolute restrictive covenants and completely foreclosed the after market for supply of spare parts and other diagnostic tools” the PTI quoted the CCI’s statement as saying. The statement wasn’t available on the CCI’s website Tuesday.

Coming so soon after China’s crackdown on price-fixing, the move reinforces the impression of emerging markets seeking to reassert their interests over multinational companies that have looked to them to pad growth and profits now that their traditional home markets in Europe, Japan and North America are saturated.

It’s also the first clear sign of the new government of Prime Minister Narendra Modi is prepared to crack down on perceived abuses by big business, despite inviting them to India with promises of less bureaucracy and more encouragement for enterprise.

The CCI said that some of these companies have made consumer-friendly commitments in other jurisdictions like Europe but failed to adopt similar practices in India.

”This makes their conduct even more deplorable,” it said.

The Financial Times noted that the CCI’s action is a challenge to India’s car industry to raise its game: sales have dropped in both of the last two years, and the safety record of Indian-made cars lags global requirements, according to independent crash test research.