An announcement has been made by the All India Tyre Dealers Federation (AITDF) that Competition Commission of India (CCI) has admitted its complaint against the acquisition of Birla Tyres’ Haridwar plant by JK Tyre.
SP Singh, Convener of AITDF said, “AITDF has decided to fully cooperate with the investigation in the interest of free and fair play of market forces in the domestic market.” In September, AITDF complained to CCI against this deal citing that big manufacturers are trying to control the pricing and influence competition, a phenomenon called cartelisation.
In its letter, AITDF said, “Going by present highly oligopolistic structure of domestic established players indulging in price rigging and demanding restriction on tyre imports, this development has serious adverse ramifications for mass of tyre trade and millions of road transport operators in the country,”
Presently, CCI is already investigating tyre manufacturers like Apollo, MRF, CEAT, JK and Birla Tyres for cartelization. The case was referred by the Ministry of Corporate Affairs and supported by AITDF.
CCI observed the anti-competitive behavior and in the order dated June 6, 2014, it stated, “2011-12 onwards there seems to be a collective decision to maintain the prices. Thus, not passing on benefit of reduction in prices of major raw materials/inputs, prima facie, indicates lack of competition and some sort of understanding between the players especially in the replacement market .”
According to tyre dealers, this deal will lead to further capacity consolidation. The complaint of AITDF mentioned, “The takeover by JK of Birla Tyres in a deal is bound to further stifle the market. Thus, government and CCI should keep the interest of hapless tyre dealers and unorganized mass of consumers, particularly truck/bus operators in ‘approving’ such an acquisition.”
Domestic tyre manufacturers have been making a joint effort to curb the inflow of cheap Chinese tyres. However, tyre dealers claim the Chinese imports are consumer-friendly and offer good quality at a good price. They blamed tyre manufacturers are trying to control the tyre prices and not passing benefits of cheap raw materials on to the customers.
Countering this accusation, tyre makers say that they have passed the price cuts to the customers and the Chinese tyres are cheaper due to the subsidies provided by their government. They say that tyres imported from China are of poor quality and the huge production capacity of Chinese tyres means that tyres are dumped in countries like India.