CCP probing Toyota, Suzuki practices

Published June 26, 2015
The inquiry will initially cover the market for consumer vehicles ranging between the engine capacity of 800cc to 1299cc in which Indus Motor Company Limited and Pak Suzuki Motor Company Limited are dominant players. ─ AFP/File
The inquiry will initially cover the market for consumer vehicles ranging between the engine capacity of 800cc to 1299cc in which Indus Motor Company Limited and Pak Suzuki Motor Company Limited are dominant players. ─ AFP/File

ISLAMABAD: The Competition Commission of Pakistan (CCP) has initiated an inquiry into the possible anti-competitive behaviour of two car manufacturers who are putting unreasonable financial burden on the consumers.

The inquiry, under Section 37 of the Competition Act, 2010, is being conducted after the commission received various complaints regarding 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 vehicles.

The inquiry will initially cover the market for consumer vehicles ranging between the engine capacity of 800cc to 1299cc in which Indus Motor Company Limited and Pak Suzuki Motor Company Limited are dominant players.

One of the major concerns shared with CCP is the consistent upward trend in prices of cars without an up-gradation 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 engines and add safety features corresponding to the increase in prices.

Similarly, one of the gravest predicaments faced by 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 pay 30 per cent of the total price of the vehicle in advance.

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 CCP noted.

The delay in delivery of vehicles is another burning issue. Despite having ample access capacity of 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 authorised dealers of 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.

It has been brought to the CCP’s knowledge in a meeting with the Engineering Development Board that neither manufacturer appears 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.

Published in Dawn, June 26th, 2015

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