On January 14, 2020, CCI issued its prima facie order directing the DG to conduct an investigation against Asian Paints Limited (‘Asian Paints’).[1]

JSW Paints Private Limited (‘JSW Paints’) had alleged that Asian Paints abused its dominant position and entered into vertical anti-competitive agreements. It was alleged that Asian Paints approached dealers/ distributors/ retailers in the states of Karnataka, Tamil Nadu and Telangana and directed them to stop dealing with JSW Paints, which was a new entrant in the market for decorative paints. More specifically, it was alleged that Asian Paints had issued directions to various dealers asking them to remove displays of JSW Paints products from their retail shelves and dealer signboards, threatened dealers by not allowing certain discretionary discounts, etc., all of which created fear amongst these dealers. As a result, many of these dealers stopped dealing with JSW Paints, despite making initial payments to them. JSW Paints contended that access to a dealership network is essential for any new entrant in the paints market which was denied to them. Further, it was alleged that Asian Paints also pressurized entities that provide infrastructural facilities like warehouses to stop storing products of JSW Paints and made further threats of punitive action against those enterprises who did not comply.  It was alleged that such conduct of Asian Paints was aimed at preventing JSW Paints from establishing its presence in the market of decorative paints and that all these actions amount to Asian Paints abusing its dominant position and entering into vertical anti-competitive agreements, thereby causing AAEC.

In relation to the claims of abuse of dominance, CCI, noting the features of the paints industry and the end-uses of different categories of paints, delineated the relevant market as the ‘market for manufacture and sale of decorative paints by the organised sector in India’. On the question of dominance, CCI was of the opinion that Asian Paints appeared to be prima facie dominant in this relevant market, with a market share of 56.33%, while the next player, i.e., Berger Paints Limited had market share of 19.19% in the FY 2018-19.

In its prima facie assessment of abuse, CCI was of the opinion that the alleged conduct of Asian Paints of threatening and pressurising dealers has denied access of necessary distribution channels to JSW Paints. CCI noted that such denial of necessary distribution channels limited the availability of alternate paint products in the market thereby reducing competition in this market. Additionally, CCI noted that the agreements / conduct of JSW Paints with its dealers were in the nature of an exclusive supply agreements and refusal to deal. Further, these restraints coupled with the threats and punitive actions taken by Asian Paints towards such dealers prima facie appeared to have created significant trade barriers for new entrants in the paints market which would also disallow benefit of better prices to the final consumers.

Accordingly, CCI ordered an investigation into such conduct of Asian Paints to ascertain whether such conduct amounted to an abuse of dominant position and whether such restraints imposed on dealers were anti-competitive in nature.

[1]  Case No. 36 of 2019, Order dated January 14, 2020.