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b) If it was possible for the consumer to switch to another primary product to avoid a price increase on the market for spare parts.

3.9.6 Regarding the first question, whether a consumer could switch to the spare parts produced by another OEM, the DG concluded that, based upon the submissions of the OEMs, most of the spare parts other than a few generic spare parts like tyres, batteries were manufactured specifically for the respective models of the cars. Moreover, even within the models of the same OEMs interchangeability of spare parts was limited. Hence substitutability of spare parts across OEMs is drastically diminished. The DG further found that for spare parts that are manufactured in-house by the OEMs there is almost nil interchangeability and for those body parts that are procured from local OESs and other overseas suppliers there is limited substitutability. In this context the DG noted that the practice of the OEMs to consider only those spare parts as genuine which are purchased from the OEMs or the OESs specified by them and which bear the OEMs logo or trademark which further diminishes the possibility of a consumer, including the authorized dealer, purchasing spares from sources other than the OEMs or their specified vendors. It was also observed that, the OEMs also impose adverse implications on validity of warranties in using parts sourced from other channels. Based upon the above facts, the DG concluded that it is impossible for a consumer to switch to spare parts manufactured by another producer (OEM) as interchangeability between the spare parts manufactured by different OEMs is almost nil.

3.9.28 The DG while reviewing the documents evidencing the grant of the intellectual property right upon an OEM found that there were several issues relating to the fact whether the OEMs actually are in the possession of a particular intellectual property right. In some of the instances the OEMs could not provide sufficient documentary evidence linking the design of a particular spare part with the claimed intellectual right protection over such design. Some of the intellectual property rights claimed by the OEMs are actually held by their overseas parent corporation and such proprietary technology has been transferred to the OEMs through technology transfer agreements ("TTA"). However, such TTAs do not contain any specific details of the intellectual property rights that are being transferred to the OEMs. Thus, given the lack of adequate information, the DG could not verify the claim of such OEMs that they were in possession of a legally valid intellectual property right. The DG also noted that the intellectual property rights claimed by the OEMs were territorial in nature and the particular right is vested upon the holder of such intellectual property rights only in a given jurisdiction. Thus even if the parent corporation of the OEMs held such rights in the territories where such rights were originally granted, the same cannot be granted upon the OEMs operating in India by entering into a TTA. Thus, the OEMs pursuant to a TTA were holding a right to exploit a particular intellectual property right held by its parent corporation and not the intellectual property right itself. Consequently, the DG concluded that such OEMs could not avail of the exemption provided in section 3(5)(i) of the Act.

(iii) Submission of OEMs on the applicability of the Essential Facilities Doctrine to their business practices 18.19 OEMs have submitted that, contrary to DG's findings the conditions necessary for invoking the 'essential facility doctrine' are not fulfilled in the present case. As per the OEMs, firstly, the OEMs are not in a dominant position, in a unified systems market for cars and spare parts/repair services. The second condition requires that the competitors of the enterprise who is in control of the essential facility will be incapable of practically or reasonably duplicating the essential facility. OEMs have submitted that it does not prevent anyone from developing spare parts and tools which are compliant with the spare parts of their respective branded cars and the only restriction is imposed upon OESs who use OEM's proprietary information to manufacture the spare parts. Thirdly, it needs to be shown that the monopolist has denied the access to the essential facility. OEMs have submitted that it does not deny access of spare parts to any independent repairers. Finally, it needs to be shown that it is feasible for the monopolist to make the essential facility available to competitors. OEMs have submitted that it is not feasible for it to make spare parts available in the open market through other distribution channels. Therefore, as per the OEMs in the light of the above submission, the DG's analysis regarding the applicability of the 'essential facility doctrine' to the OEMs business practices is completely baseless.

(vii) Submissions of OEMs on 'Single Branding' clauses of their agreements with authorized dealers 18.28 OEMs have denied the DG's assertion that they have placed restrictions on their respective authorized dealers from taking up dealerships of other OEMs and that such restrictions violate the provisions of the Competition Act. As per the OEMs, they have authorized dealers whose promoters have dealerships of competing OEMs and that the restrictions placed on the authorized dealers are only of taking prior approval. OEMs have submitted that such restrictions are reasonable and allow the OEMs to assess the risk appetite of the dealer and to protect the brand of the OEM from being diluted. OEMs have stated that in situations where the same dealer is dealing in multiple brands, it is difficult for an OEM to assess the performance of the dealer and also assess the demand in relation to each vehicle as well as the sale of spares and repair and maintenance. Therefore, as per the OEMs, the single branding clauses of their authorized dealer agreements are merely reducing the risk of brand erosion and losses in the existing dealership structure. As per the OEMs prior consent requirement for competing dealerships is necessary to prevent other OEMs from free-riding on the significant investments made to develop an authorized dealer network.