Competition Commission of Pakistan initiates inquiry into unfair trading conditions imposed by dominant manufacturers in the automobile industry

Islamabad, June 25, 2015 (PPI-OT):The Competition Commission of Pakistan (CCP) has initiated an inquiry under Section 37 of the Competition Act, 2010 into the possible anti-competitive behaviour of the two dominant car manufacturers in the automobile sector, which is, prima facie, responsible for putting unreasonable financial burden on the consumers of passenger vehicles without giving them value for money.

CCP started the inquiry after receiving various complaints and concerns highlighting the issues of high prices of vehicles, hefty advance payments, delay in delivery of passenger vehicles, charging of premiums for on-spot delivery, and no facility to recall the vehicles. The inquiry will initially cover the market for consumer vehicles ranging between the engine capacity of 800 cc to 1299 cc in which Indus Motor Company Limited and Pak Suzuki Motor Company Limited are the dominant players.

One of the major concerns shared with CCP is the consistent upward trend in the in the prices of cars without an upgradation of the technology. Although the prices of locally assembled cars have increased manifolds over the past years, the manufacturers have failed to take significant measures to upgrade the engines and add safety and other features corresponding the increase in prices.

Similarly, one of the gravest predicaments faced by the consumers of new cars is the requirement of hefty advance payments for placing the order to book a car. In this regard, it has been observed that Suzuki requires full advance payment despite a non-negotiable delay in the delivery of its vehicles.

Toyota has slashed this requirement to considerable extent, however, it still requires the buyers to make a 30 % of the total price of the vehicle. The advance payment requirement on the one hand rids the customers of the opportunity to earn profits on their cash, and on the other hand allows the manufactures to accrue that profit for themselves.

The delay in delivery of vehicles is another burning issue. Despite having ample access capacity of the dominant manufacturers, the delay is questionable particularly in the case of those models that have not undergone considerable changes and whose demand forecast can be made with relative certainty. As is the case of advance payments, the delay in delivery of vehicles is linked to the benefits forgone by the consumers.

Furthermore, the charging of premiums by the authorized dealers of the dominant manufactures for on-spot delivery has the potential to create a predicament where the manufacturer or dealers find it to their advantage to delay the deliveries of car in order to make more revenue.

CCP has also noticed and it has been brought to its knowledge in a meeting with the Engineering Development Board that neither manufacturer appear to be facilitating the option of recall of vehicles, which, prima facie, indicates a lack of a healthy competition in the market.

In light of the seemingly dominant positions held by Toyota and Suzuki in the consumer vehicle sector, it appears that consumers are being left without alternatives to consider. Through this investigation, CCP will determine whether the behaviour by Toyota and Suzuki constitutes the imposition of unfair trading conditions in violation of Section 3 of the Competition Act.

CCP is mandated by the Competition Act to enforce the prohibitions against anti competitive practices in all spheres of commercial and economic activities and to protect consumers from anti-competitive behaviour.

For more information, contact:
Asfandyar Khattak
Director (Media and Communications)
Competition Commission of Pakistan (CCP)
7th Floor South, ISE Towers,
55-B, Jinnah Avenue, Islamabad, Pakistan
Tel: +92-51-9100260-3, +92-51-9100256
Fax: +92-51-9100251