Case BriefsTribunals/Commissions/Regulatory Bodies

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]

Case BriefsTribunals/Commissions/Regulatory Bodies

National Anti-Profiteering Authority (NAA): The Quorum of B.N. Sharma, Chairman and J.C. Chauhan, R. Bhagyadevi and Amand Shah, Technical Members, dealt with an application alleging profiteering on the supply of “Paint” by not passing on the benefit of reduction in the rate of tax of GST.

For the above-stated issue, the application was examined by the Standing Committee on Anti-Profiteering and was further referred to Director General of Anti-Profiteering (DGAP).

DGAP in its report on investigating the issue in a detailed manner stated in its report that vide Notification No. 41/2017-Central Tax (Rate) dated 14.11.2017, the rate of GST was reduced from 28% to 18% on the said product. Respondent had reduced the selling price (including GST) of the above product from Rs 175.40 to Rs 161.70 by maintaining the base price of Rs 137.03 (after discount) and charging GST at a lower rate of 185 on the said price.

DGAP on the analysis of the scenario stated that, there was no contravention of Section 171 of the CGST Act, 2017 relating to profiteering.

On careful consideration of the DGAP’s report and the documents placed on record, the Authority stated that it is evident that the respondent had maintained the same base price post reduction in the rate of tax resulting in the cum-tax price from Rs 175.40 to Rs 161.70. Since the benefit of reduction has been passed on by the respondent by a commensurate reduction in his price, he cannot be held guilty under Section 171 of the CGST Act. [Kerala State Screening Committee on Anti Profiteering v. Asian Paints Ltd., 2019 SCC OnLine NAA 15, Order dated 13-03-2019]