On September 8, 2022, pursuant to a complaint filed by JSW Paints Private Limited (‘JSW Paints’) in 2019 along with a complaint filed by Sri Balaji Traders (‘Balaji’), the CCI dismissed allegations of anti-competitive vertical restraints and abuse of dominant position under Section 3(4) and 4 of the Competition Act against Asian Paints Limited (‘Asian Paints’).^[1]

As background, JSW Paints had alleged that:

1. Denial of access to dealers and necessary distribution channels: JSW Paints has been denied access to dealers, which is essential for operating in the relevant market, due to punitive action taken by Asian Paints against the dealers. JSW Paints is stated to have faced problems in the states of Karnataka, Tamil Nadu and Telangana. Further, without access to dealers, which is an essential feature of this business, there is no scope for a new or existing entity in this market to survive.
2. Denial of access to infrastructural facilities: Asian Paints allegedly also pressurized enterprises that provided infrastructure facilities like warehouses to JSW Paints to not stock products of JSW Paints. In an instance cited, the enterprise that provided warehouse facility rescinded the contract with JSW Paints on account of Asian Paints requiring it to choose between Asian Paints and JSW Paints for a business relationship.
3. Enforcing an exclusive supply arrangement by way of reduction in credit limit of dealers: Based on instances highlighted in the States of Karnataka, Telangana and Tamil Nadu, it was alleged that the conduct of Asian Paints is a case of enforcing an exclusive supply agreement in terms of Explanation (b) to Section 3(4) of the Competition Act and refusal to deal as provided in Explanation (d) to Section 3(4) of the Competition Act.

Balaji had alleged that:

1. Revocation of Critical Retailer Status without prior notice: Soon after Balaji Traders began dealing with JSW Paints in February 2021, its ‘Critical Retailer’ status, given by Asian Paints since 2010, was revoked in March 2021 without prior notice. Resultantly, the tinting software installed on Balaji Traders’ computer by Asian Paints, which enables a retailer to make critical shades, was also removed. It was alleged that removal of this software has prevented Balaji Traders from placing new orders of the Critical Retailer products of Asian Paints and from tinting the leftover material to create shades exclusively offered to a Critical Retailer.

The CCI in its analysis delineated the relevant market as “market for manufacture and sale of decorative paints in India” and noted, based on the factors under Section 19(4) of the Competition Act, the DG investigation report and submissions made by JSW Paints, that Asian Paints is dominant in the relevant market.

While, analysing allegations of abuse of dominant position by Asian Paints, vis-à-vis the denial of access to dealers and distribution channels, the CCI noted that JSW Paints added 1591 dealers over FY 2019–20 and 2020–21 vis-à-vis Asian Paints, which added only 1217 new dealers during the same period. The CCI also noted that, out of 1591 dealers of JSW Paints as on 31.03.2021, 1378 (86.6%) dealers dealt with Asian Paints also. Also, many of the complainants later, during the investigation, stated that there is no coercion exercised on part of Asian Paints. Therefore, the CCI concluded that these figures of common dealers clearly demonstrates that JSW Paints’ entry into the market has not been impeded, and JSW Paints has made considerable inroads into the dealer network in a short span of time.

With respect to the allegation pertaining to denial of access to infrastructural facilities, the CCI took the view that there appears to have existed some inter se disputes between JSW Paints and the owner of the warehouse facility, which cannot be attributable to Asian Paints in the absence of any concrete evidence. Thus, the allegation of denial of infrastructural facilities is not supported by evidence on record.

Lastly, with respect to the imposition of an exclusive supply arrangement by way of reducing credit limits of dealers by Asian Paints’, based on the evidence on record the CCI held that the reduction in credit limit in almost all cases of dealers would have been necessitated on account of business considerations, either due to reduction in off-take by the dealer concerned or on account of unpaid accumulated overdues over a period, which is stated to be as per a laid down policy of Asian Paints.

With regards to the complaint filed by Balaji, the CCI agreed with the DG’s findings that the inference has been drawn on the basis that the change in retailing tier was affected on 28.04.2021 as against the alleged claim of February 2021 by the dealer. Further, the dealer was consistently reducing offtake from Asian Paints, which reduced to less than half over a 10-month period, from October 2020 to July 2021. The retailing tier of the said dealer was restored in June 2021 along with seven other dealers after a review exercise undertaken by Asian Paints based on sales, expected sales, customer outreach and other relevant factors.

Accordingly, the CCI dismissed the complaint under Section 3(4) and Section 4 of the Competition Act. The CCI observed that there must be evidence which, on balance of probabilities, would point towards a strong entrenched player using tactics to oust a smaller player or even a new entrant to the market (regardless of its size or inherent advantages). This could be done by either incentivizing or coercing downstream players to boycott or not deal with the new players. The CCI noted that in the present case, the balance is not tilted towards JSW Paints.

[1] Case No. 36 of 2019 & Case No. 17 of 2021.