Reference no: EM132728059

The evolution of tire manufacturing and tire availability in India could roughly be broken down into two specific phases. In the initial phase, dating back to 1936, tire manufacturing, initiated by Dunlop, a multinational company, was dominated by Dunlop and Firestone. Good Year and India Tire and Rubber (ITR) were two additional tire trading companies. This concentration of production led to uniformly high prices across India, regardless of the geographical differences associated with supplying different parts of the country. As demand grew, the Indian government chose to license new competitors instead of allowing existing ones to grow, to introduce competition in the Indian market. This did not result in the increased level of competition expected. The government subsequently allowed existing providers to expand. Post 1990, after the Indian government liberalized the market by reducing tariff and nontariff barriers to allow more foreign competition, there was an unprecedented increase in the importation of foreign tires. There was also tire exports too, but mainly to less developed and less demanding foreign markets. By 2014-15, there were 39 companies in the Automotive Tire Manufacturers' Association (ATMA) in India. However, only a handful of them had significant market share. Despite the increase in competition, and reduction in costs of rubber, these costs were not being passed on to consumers. As intermediaries between manufacturers and consumers, the All India Tire Dealers Federation (AITDF) engaged the Ministry of Corporate Affairs in November 2013 to charge the five major tire manufacturers of collusion and engaging in price parallelism (price fixing). This issue pitted the AITDF against the ATMA.

-What roles of government are evident in the attention paid to the tire industry?

-What types of regulation are evident in the case?

-Which interests are the government protecting, through regulation?