Home News CCI orders probe against Asian Paints

CCI orders probe against Asian Paints

The Competition Commission of India (CCI) has prima-facie found sufficient evidence against Asian Paints to indicate that the company has denied access to the distribution channels in the relevant market to JSW Paints by threatening and coercing such dealers through various means. It also found that Asian Paints, “prima-facie”, appears to be in contravention of provisions of the Competition Act. So, the CCI has ordered a probe against Asian Paints for allegedly hindering the entry of JSW Paints by virtue of its dominance in the market for manufacture and sale of decorative paints. The order came after JSW Paints filed a complaint alleging that Asian Paints threatened various dealers in Karnataka, Telangana and Tamil Nadu from dealing with JSW Paints.

“The Company is currently examining the order and will take appropriate legal recourse and will extend full co-operation to CCI in the matter,” said Asian Paints in a regulatory filing to the exchanges. JSW Paints, in its complaint, alleged that the dealers faced punitive action at the hands of Asian Paints if they continued to deal with JSW Paints. It was also alleged that Asian Paints threatened the dealers to discontinue their supplies, and disallowed discretionary discounts, among others. These restraints appear to be in the nature of exclusive supply agreement and refusal to deal, JSW Paints alleged. Besides, JSW Paints stated that Asian Paints has always maintained the highest market share and there have been no new players in the relevant market in the past 10 years. (also see https://sawdust.online/2020/industry-trends-snapshot/decorative-paints-market-leader-keeps-competitors-guessing/)

It also said “the alleged restrictions on dealers not to deal with JSW Paints or any other company manufacturing paints can create barriers for suppliers of paints, who compete with these suppliers besides not allowing the benefit of better prices to the consumers.” Accordingly, the Competition Commission of India (CCI) in its order passed on Wednesday directed the director general “to complete the investigation and submit the investigation report within a period of 60 days from the receipt of this order”.

Asian Paints is the undisputed market leader in Indian decorative paints industry. It enjoys 51% of the market share in volume and 58% in value. Further, it pockets 64% of the profits. It has more than 50,000 dealers all over the country while the second best (Berger Paints) has a dealer network of about 20,000.  On the other hand, JSW Paints is a new entrant to the paints industry – it made its debut in the industry last year. Presently, it is focusing on Southern market and that too Tamil Nadu. However, it aims to capture 10% of domestic market share in next few years. Presently, the company is trying to expand its dealer network in the South by offering higher commission than its competitors.

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