Tata Motors has said it is reviewing an order issued by the Competition Commission of India (CCI) to probe an alleged abuse of dominant position by the company with regard to dealership agreements.

“We understand that the CCI has passed a prima facie order and has not made any final or binding observations with regard to the allegations levelled against Tata Motors.

“Tata Motors is reviewing the order available in the public domain and will consult its legal counsel to take necessary steps,” a spokesperson of the company said.

The order came on two complaints filed against Tata Motors, Tata Capital Financial Services Ltd and Tata Motors Finance Ltd (called opposite parties in the complaint).

“The Commission is of the view that prima facie a case of contravention of the provisions of Section 3(4) and Section 4 of the Act is made out against Tata Motors...and the matter requires to be investigated,’’ the CCI said in a 45-page order on May .

The allegation was that as Tata Motors is a dominant entity in the commercial vehicles segment and enjoys an 85 per cent market share in North India especially Uttar Pradesh, every authorised dealer of Tata Motors is obligated to raise finance or loans from banks or NBFCs such as Tata Capital and Tata Motors Finance.

The lawyer for the informant also alleged that to sustain and retain the market share, the Tata’s business model was both manufacturing and financing of commercial vehicles. The informant has also charged that such a model or arrangement is abusive, anti-competitive and detrimental to the financial health of the authorised dealer.

“The informant has claimed that the finance facility was extended by Tata Capital and Tata Motors Finance to the authorised dealers according to the direction and desire of Tata Motors,’’ the order said.

The commission said that the dealership provided a complete trail of the e-mails as evidence that “ex facie suggest that Tata Motors indulged in the practice of coercing the dealers to bill vehicles according to the company’s own needs and requirement,’’ the CCI said.

The dealers have said the agreement with them provides that the former shall not start, acquire or indulge in any new business (of product or services) even if it is not related to the automobile industry.

However, Tata Motors in its response has defended the clause saying it does not seek to impose a blanket restriction on the dealer for seeking an NOC.

"However, looking at the overarching restriction and the actual implementation of such clauses, the Commission has no hesitation in holding that the same appears to be unduly restrictive and expansive in its coverage and interferes with the freedom of trade. Consequently, the Commission is prima facie of the opinion that such clause is an unfair imposition upon the dealers besides resulting in denial of market access to the dealers to other markets in contravention of the provisions of Section 4(2)(a)(i) and 4(2)(c) of the Act, respectively’", the CCI said.