Decorative and industrial paints major Asian Paints will be investigated by the Competition Commission of India over allegations that the company violated the Competition Act by preventing JSW Paints from entering the market.
The complaint against Asian Paints has been filed with the CCI by JSW Paints along with evidences to show that Asian Paints took severe action against its distributors for dealing with JSW Paints. The CCI in its order to investigate Asian Paints has clearly stated that it is satisfied that there are sufficient grounds for such an investigation to be carried out by the DG investigation at the CCI.
CCI has observed that the actions of Asian Paints could amount to denial of market access, which is considered “a severe form of abuse of dominant position”. JSW Paints claims the dominant position of Asian Paints is demonstrated by the fact that there has not been a single new entrant in the paints industry in the past 10 years.
"In the facts of the present case, the Commission notes that the alleged conduct of Asian Paints of threatening and pressurising dealers as highlighted by JSW Paints prima-facie brings out that Asian Paints has attempted to prevent JSW Paints in establishing a presence in the relevant market,” the CCI order states.
The DG has been given 60 days to complete the investigation and submit the report.
There have been cases in the past where the dominant player in an industry or trade uses the position to threaten their dealers if they tried adding more brands in their dealership. Competition Act prevents companies from entering into exclusive agreements with their dealers.
Before the Act came into existence, companies used to have this clause in their dealer agreements where if the dealer were to deal in any competitor’s products, the dealership would stand withdrawn. This prevented the dealers from expanding their businesses beyond one brand. The loss of dealership of the leading brand would mean huge financial losses for them. The Competition Act has put an end to that practice.
The complaint filed by JSW Paints has referred to specific markets, like Karnataka, Telangana and Tamil Nadu. Possibly they had the proofs from affected dealers to drive home their accusation.