CCI |”Asian Paints” threatened dealers to discontinue their supplies with alleged intent to hinder entry of “JSW Paints “

Competition Commission of India (CCI): The Bench of Ashok Kumar Gupta (Chairperson) and Sangeeta Verma and Bhagwant Singh Bishnoi, Members, while dealing with a complaint filed by JSW Paints against Asian Paints, held that,

“A stipulation that appears to create barriers to entry and restricts choice of consumers is likely to result in an appreciable adverse effect on competition resulting in higher prices for consumers.”

In the present case, JSW paints after building up its business after 3 years had launched its decorative paints in May 2019 and after the launch of the same, Asian Paints began pressurizing dealers who had agreed to stock and display decorative paints manufactured by them. Such conduct created fear amongst the retailers/dealers, as a result of which a number of them stopped dealing with JSW Paints, despite having provided the initial cheque of Rs 1 lakh as an advance against the launch orders of JSW Paints.

Several dealers were compelled to remove all signage and promotional material from conspicuous locations in their premises to the backside of the premises or their godowns. For the fear of losing dealership of Asian Paints, certain dealers decided to discontinue purchase of JSW Paint’s products.

Asian Paints allegedly pressurised enterprises that provided infrastructure facilities like warehouses to JSW Paints to not keep products of JSW Paints.

It was also stated that earlier on an occasion Asian Paints had taken punitive action against a dealer on account of its decision to stock and sell paints manufactured by Nippon Paint India Private Limited.

By virtue of its dominance, Asian paints hindered the entry of JSW Paints in contravention of Section 4(2) (c) of the Act.  Such practice not only leads to an effective and efficient competitor being driven out of a market or is restricted from entering a market, but also limit consumer choice.

All instances of abusive conduct tantamount to perpetuating anti-competitive agreements as Asian Paints enjoys dominant position in the relevant market.

Commission’s Decision

It noted that JSW Paints appears to be aggrieved by denial of market access by Asian Paints to distribution channels/dealers in the market in abuse of dominant position held by Asian Paints.

Commission held that, Asian Paint’s conduct is alleged to directly aim at foreclosing the entry of a new entrant like JSW Paints from competing in relevant market and also driving existing competitor like Nippon out of the market.

Asian Paints threatened the dealers to discontinue their supplies, disallowed discretionary discounts, etc. These restraints appear to be in the nature of exclusive supply agreement and refusal to deal. The stated restriction limits the benefits to the consumers as well.

Thus, Commission hold that it is prima facie satisfied that imposition of said restraints amounts to contravention of Section 3(1) read with Sections 3(4)(b) and 3(4)(d) of the Competition Act, 2002 by Asian Paints which is prima facie found to enjoy market power.

The present case requires investigation by the DG to determine whether the same has resulted in the contravention of the provisions of Section 4(1) of the Act and 3(1) read with Section 3(4) thereof. [JSW Paints Pvt. Ltd. v. Asian Paints Ltd., 2020 SCC OnLine CCI 1, decided on 14-01-2020]

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