Exclusive Motors Pvt. Limited v. Automobili Lamborghini S.p.A.

The case of Exclusive Motors Pvt. Limited v. Automobili Lamborghini S.p.A. is a significant decision by the Competition Commission of India (CCI) that sheds light on the application of the Competition Act, 2002 to intra-group arrangements and the concept of dominance in niche markets. 

It primarily deals with issues relating to alleged anti-competitive agreements and abuse of dominant position by Lamborghini, in connection with its dealings with Exclusive Motors and Volkswagen India.

Background of Exclusive Motors Pvt. Limited v. Automobili Lamborghini S.p.A. Case

Exclusive Motors Pvt. Limited (hereinafter “ExMo”) is a Delhi-based company that imports and sells super sports cars in India. Its business model involves entering into dealership agreements with manufacturers of luxury sports cars like Lamborghini, Aston Martin, and Bentley to distribute these cars through Indian dealerships.

In 2005, ExMo entered into an exclusive dealership agreement with Automobili Lamborghini S.p.A. (hereinafter “Lamborghini”), the Italian super sports car manufacturer. Lamborghini is a subsidiary of Audi AG, which is itself part of the Volkswagen Group. ExMo was appointed as the sole importer and dealer of Lamborghini cars in India, primarily responsible for promoting the brand and developing the market across the country.

Key Developments Leading to the Dispute

In 2011, Volkswagen Group launched Volkswagen India, a separate legal entity to handle the import and distribution of Volkswagen and other group brand cars in India. Subsequently, Lamborghini decided to switch its import and distribution arrangements from ExMo to Volkswagen India, which meant that the exclusive dealership rights held by ExMo would be terminated.

In January 2012, Lamborghini requested ExMo to terminate the existing dealership agreement and enter into a new agreement with Volkswagen India. The proposed new agreement stipulated a reduction in the termination notice period from 12 months to 3 months and required ExMo to pay a higher deposit amount. ExMo refused to accept these changes.

Lamborghini then issued a 12-month termination notice to ExMo as per the original agreement. During this notice period, ExMo alleged that Lamborghini adopted discriminatory pricing by offering cars and spare parts at higher prices to ExMo than to Volkswagen India. ExMo also claimed it was unfairly denied market access when Volkswagen India became the exclusive importer and dealer.

As a result, ExMo filed information before the Competition Commission of India under Section 19(1)(a) of the Competition Act, 2002, alleging violations of Sections 3 and 4 of the Act by Lamborghini and Volkswagen India.

Issues for Consideration

The main issues that arose in Exclusive Motors Pvt. Limited v. Automobili Lamborghini S.p.A. were:

1. Whether Volkswagen India and Lamborghini could be regarded as separate “enterprises” under Section 2(h) of the Competition Act, given that they are subsidiaries of the same parent group.
2. Whether the agreement or arrangements between Lamborghini and Volkswagen India constituted an “agreement” under Section 3 of the Act, making it subject to scrutiny for anti-competitive conduct.
3. Whether Lamborghini abused its dominant position in the relevant market by imposing unfair or discriminatory conditions on ExMo and denying market access by appointing Volkswagen India as the exclusive dealer.

Relevant Legal Provisions

The following provisions of the Competition Act, 2002 were central to the Commission’s analysis:

• Section 2(h) defines “enterprise” and acknowledges that entities within the same group can be considered a single economic entity for competition law purposes.
• Section 3 prohibits anti-competitive agreements, including those that fix prices (Section 3(3)(a)) or involve exclusive distribution agreements (Section 3(4)(c)).
• Section 4 addresses abuse of dominant position, including imposing unfair or discriminatory prices or conditions (Section 4(2)(a)(i) & (ii)) and denial of market access (Section 4(2)(c)).
• Section 19(1)(a) allows the Commission to inquire upon receipt of information alleging contraventions of Sections 3 or 4.
• Section 26(1) and (2) concern the procedure for inquiry and closure of cases where no prima facie case is found.

Exclusive Motors Pvt. Limited v. Automobili Lamborghini S.p.A. Jugdement by Competition Commission of India

Single Economic Entity Doctrine

A core aspect of the case was whether Lamborghini and Volkswagen India were separate enterprises for the purpose of Section 3. The Commission applied the “single economic entity” doctrine, a principle accepted internationally and under Indian law, which holds that companies forming part of the same corporate group and sharing a common economic interest are to be treated as a single enterprise.

Though Volkswagen India was a separate legal entity, it was wholly owned and controlled by the Volkswagen Group, which also owns Lamborghini. Therefore, the Commission held that agreements or arrangements between Lamborghini and Volkswagen India could not be regarded as agreements between independent enterprises under Section 3.

Consequently, the internal arrangements between these related companies were not subject to Section 3 scrutiny as there was no cartel or collusion between separate enterprises.

Relevant Market and Dominance

The informant (ExMo) defined the relevant product market as the market for “super sports cars” in India. Characteristics of this market include:

• Cars with engine capacities above 3,500cc.
• High horsepower (450 HP or more).
• Low weight (generally 2,000 kg or less).
• High speed capabilities (above 250 kmph).
• Prices generally exceeding ₹2 crores.

The Commission accepted this delineation of the relevant market as reasonable, considering the distinct nature of super sports cars in terms of design, usage, pricing, and consumer base.

The geographic market was defined as India as a whole, which was found appropriate.

Regarding dominance, the informant argued that Lamborghini held over 50% market share in this niche, and Volkswagen Group’s combined share exceeded 60%. However, the Commission observed that the super sports car market in India was very small, with only about 93 cars sold in five years across all manufacturers.

Further, there were several other brands present in India (Ferrari, Aston Martin, Porsche, etc.) competing with Lamborghini, and none had a substantial enough share or economic strength to be considered dominant.

The Commission also noted the absence of significant entry barriers or consumer dependence that could confer dominance to Lamborghini. Therefore, the Commission concluded that Lamborghini was not dominant in the relevant market.

Allegations of Abuse

ExMo alleged that Lamborghini abused its dominant position by:

• Imposing unfair and discriminatory pricing, offering cars and spare parts at higher prices to ExMo compared to Volkswagen India.
• Denying ExMo market access by appointing Volkswagen India as the exclusive importer and dealer, thereby excluding ExMo and other prospective dealers.

The Commission examined these allegations and found that:

• The right of a company to appoint its own subsidiary as an importer or dealer in a country is a legitimate commercial decision and not an abuse of dominance.
• There was no evidence that Lamborghini’s conduct had the effect of unfairly harming ExMo’s ability to compete.
• Pricing differences during the notice period were part of a business dispute over dealership arrangements and did not amount to abuse.
• The small size of the market and the limited number of cars sold did not justify a finding of dominance or abuse.

Hence, the Commission held there was no abuse of dominant position by Lamborghini.

Final Decision

Based on the above analysis, the Competition Commission of India concluded in Exclusive Motors Pvt. Limited v. Automobili Lamborghini S.p.A. that:

• The intra-group agreement between Lamborghini and Volkswagen India did not constitute an anti-competitive agreement under Section 3.
• Lamborghini was not dominant in the relevant market, and thus, no abuse under Section 4 was established.
• There was no prima facie case warranting a full investigation by the Director General under Section 26.

Accordingly, the case was closed under Section 26(2) of the Competition Act, 2002.

Conclusion

In summary, the case of Exclusive Motors Pvt. Limited v. Automobili Lamborghini S.p.A. is a crucial decision that balances enforcement of competition law with the realities of corporate structures and commercial strategy.

The Competition Commission of India wisely adopted the “single economic entity” doctrine, preventing unnecessary litigation over intra-group arrangements. It also undertook a nuanced approach in evaluating dominance and abuse in the highly specialised super sports car market.