Restraining Dealers from Dealing with Competitors is imposing unfair conditions, Amounts to exploitative conduct: CCI Directs Investigation on Asian Paints [Read Order]

The Competition Commission of India (CCI) directed the Director General (‘DG’) to cause an investigation on Asian Paints, on finding that restraining dealers from dealing with competitors is imposing unfair conditions and amounts to exploitative conduct.

The Information in the present matter has been filed by Grasim Industries Limited (Birla Paints Division) (‘Informant’) under Section 19(1)(a) of the Competition Act, 2002 (the ‘Act’) against Asian Paints Limited (‘OP’), alleging abuse of dominant position by the OP in contravention of the provisions of Section 4 of the Act.

The Informant is stated to be a flagship company of the Aditya Birla conglomerate and a publicly listed company on the National Stock Exchange and Bombay Stock Exchange. It is stated to be involved in several industries including manufacturing of man-made fibers, chemicals, etc. It is stated that at the end of last quarter of Financial Year (‘FY’) 2024, the Informant entered the decorative paints market in India under the brand name ‘Birla Opus Paints’ (except for the pre-launch of wood finish paint in June 2023).

The OP is the largest public company in the decorative paints market in India. It is said to have been established in the year 1942 and currently operating in 15 countries with 27 manufacturing facilities in the world. It is stated to have been a market leader in the paints industry since 1967, and manufacturing paints for both decorative and industrial use.

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It was alleged that the OP, being an ‘enterprise’ within the meaning of the Act, has abused its dominant position, in the relevant ‘market for manufacture and sale of decorative paints in the organized sector in India’, by, inter alia:offering additional/ extra discounts/ condonations/ incentives like foreign travel etc. to its dealers in exchange for exclusivity, which is arbitrary in nature and not linked to any uniform policy or based on performance/ sales of the dealer.

The Informant has averred that the OP is indulging in violation of the provisions of Section 4(2)(a), 4(2)(b), 4(2)(c) and 4(2)(d) read with Section 4(1) of the Act. The Informant also filed an Interlocutory Application (‘I.A.’) bearing no. 434 of 2024 on 27.12.2024 seeking urgent consideration of the Information as the anticompetitive conduct of the OP is significantly and adversely impacting its business operations.

The Commission, upon consideration of the Information in its ordinary meeting held on 29.01.2025, sought certain additional information from the Informant. The Informant filed its response to said order of the Commission on 06.03.2025.

Meanwhile, the OP submitted that the Indian paint market is highly competitive, comprising 09-10 players (including multi-nationals) and a number of other regional entities. The decorative paints industry has low barriers to entry, which is evidenced by successful entry and rapid expansion of several new players in this market in recent years.

Further, it stated that paint products are distributed through a vast network of multibrand dealers, including electrical, hardware, sanitary, PVC pipe, and cement shops. Also, a significant majority of paint dealers represent at least 2-3 paint companies, and nearly all also work with regional players.

Once the OP has been found to be in a prima facie dominant position in the delineated relevant “market for manufacture and sale of decorative paints in the organized sector in India”, the Commission now proceeds to analyse if there is any merit in the allegations of abuse made by the Informant which may warrant initiating an investigation in the present matter.

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Prima facies, it appears that many dealers are facing issues with the OP enforcing exclusivity upon them by coercing them against stocking other manufacturers’ paints including the Informant’s paints by using various methods. In the opinion of the Commission, such conduct being indulged into by the OP prima facie amounts to imposition of unfair conditions upon dealers by the OP in the sale of decorative paints, in contravention of the provisions of Section 4(2)(a)(i) of the Act.

The Coram found that many dealers have been discouraged from using other brands’, especially the Informant’s, tinting machines by the OP, which prima facie amounts to imposition of unfair conditions upon the dealers, in contravention of the provisions of Section 4(2)(a)(i) of the Act.

It was found that the OP is not following any uniform policy in offering additional discounts/ condonations/ incentives to its dealers, which may be linked to the performance/ sales of the dealer prima facie amounting to imposition of discriminatory condition upon the dealers in contravention of the provisions of Section 4(2)(a)(i) of the Act and imposition of supplementary obligations upon them in contravention of the provisions of Section 4(2)(d) of the Act.

The bench comprising Ms. Ravneet Kaur, Chairperson, Mr. Anil Agrawal , Ms. Sweta Kakkad , Mr. Deepak Anurag found that OP, by way of restraining its dealers from dealing with the OP’s competitors like the Informant and by enforcing exclusivity upon such dealers is imposing unfair conditions upon them, which is found to be in the nature of exploitative conduct.

The Commission, in terms of the provisions contained in Section 26(1) of the Act, directed the Director General (‘DG’) to cause an investigation to be made into the matter and submit an investigation report within a period of 90 days of the receipt of the present order.

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