Disposed
36 of 2019 and 17 of 2021 of Jsw Paints Private Limited v. Asian Paints Limited (36 of 2019) and Sri Balaji Traders v Asian Paints Limited (17 of 2021)
CCI36 of 2019 and 17 of 2021
What the court decided
AI extract
Outcome
Disposed
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
COMPETITION COMMISSION OF INDIA
Case No. 36 of 2019
In Re:
JSW Paints Private Limited Jindal Mansion, 5A, Dr. G Deshmukh Marg, Mumbai- 400026 And Asian Paints Limited 6A, Shantinagar, Santacruz (E), Mumbai- 400 055
Informant No.1
Opposite Party
With
Case No. 17 of 2021
Sri Balaji Traders Informant No.2 31, Mailam Road, Tindivanam – 604002 Tamil Nadu And Asian Paints Limited Opposite Party 6A, Shantinagar, Santacruz (E), Mumbai- 400 055 CORAM
Mr. Ashok Kumar Gupta Chairperson Ms. Sangeeta Verma Member Mr. Bhagwant Singh Bishnoi Member
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Appearances during the final hearing held on 31.05.2022
| For JSW Paints Private limited (Informant No: 1) |
: : : : : Mr. Gopal Jain, Senior Advocate Mr. Vivek Agarwal, Advocate Ms. Aayushi Sharma, Advocate Mr. Divyansh Prasad, Advocate Mr. A.S. Sundaresan, Authorised Representative |
|---|---|
| For Sri Balaji Traders(Informant No: 2) |
: : : : : : Mr. Vaibhav Gaggar, Advocate Mr. Sumit Garg, Advocate Mr. Nipun Bansal, Advocate Mr. Ketan Sarraf, Advocate Mr. Akash Chatterjee, Advocate Ms. Kokila Kumar, Advocate |
| For Asian Paints Limited(Opposite Party) |
: : : : : : : Mr. Neeraj Kishan Kaul, Senior Advocate Mr. Rajshekhar Rao, Senior Advocate Mr. Harman Singh Sandhu, Advocate Ms. Nikita Dwivedi, Advocate Ms. Raveena Kumari Sethia, Advocate Ms. Ami Parikh, Authorised Representative Mr. Sumit Midha, Authorised Representative |
Order under Section 26(6) of the Competition Act, 2002
Facts, in brief (Case No. 36 of 2019)
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amongst 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.
Instances in the State of Karnataka
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Asian Paints. The rescission of contract with JSW Paints led to delay in the launch of JSW’s products in Hubli, which resulted in loss of revenue, reputation and credibility.
Instances in the State of Tamil Nadu
Instances in the State of Telangana
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dealers. Such practices not only led to an effective and efficient competitor being driven out of a market or restricted from entering a market, but also limited consumers’ choice. It was stated that the decorative paints market is dependent upon the direct distributorship model. Without access to dealers, which is an essential feature of this business, there is no scope for new or existing entity in this market to survive. Asian Paint’s conduct allegedly led to the denial of access to necessary distribution channels in the relevant market, which prevented JSW Paints from entering the relevant market in contravention of the provisions of Section 4(2)(c) of the Act. Asian Paints deliberately and maliciously sought to pressurise dealers, who are mainly small and medium scale enterprises, from stocking and selling JSW Paint’s products.
Prima-facie consideration of the Commission in Case No.36 of 2019
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position, the Commission noted that denial of market access is a severe form of abuse of dominant position. It was observed that, without access to the dealers, there is no scope for a new or existing entity to survive in the market, as the dealers are the interface of business with customers and help the products of manufacturers reach them. In the facts of the present case, the Commission noted that the alleged conduct of Asian Paints of threatening and pressurising dealers as highlighted by JSW Paints prima facie brought out that Asian Paints attempted to prevent JSW Paints in establishing a presence in the relevant market, and this conduct prima facie appeared to be tantamount to abuse of dominant position by Asian Paints, wherein Asian Paints denied access to necessary distribution channels in the relevant market and limited the availability of alternate products in the relevant market for consumers, thereby reducing the competition in the market in contravention of provisions of Section 4(2)(c) of the Act. The Commission also observed that, as a result of the conduct of Asian Paints, the final consumers may also be deprived of the choice to purchase different kinds of paints at competitive prices. The Commission was of the view that evidence provided by JSW Paints was prima facie sufficient to indicate that Asian Paints denied access to the distribution channels in the relevant market to JSW Paints by threatening and coercing such dealers through various means. In view of foregoing, Asian Paints prima facie appeared to be in contravention of provisions of Section 4(2)(c) of the Act.
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Act read with Sections 3(4)(b) and 3(4)(d) of the Act by Asian Paints, which is prima facie found to enjoy market power. Accordingly, the Commission directed the DG to cause an investigation to be made into the matter under the provisions of Section 26(1) of the Act.
Facts, in brief (Case No.17 of 2021)
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Prima-facie consideration of the Commission in Case No.17 of 2021
Findings of Investigation
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preference among consumers. The said study revealed that 58% of the respondents preferred to buy specific brands as they are mostly durable, cost effective and good quality. It was found that 95% of the respondents use or prefer leading brands. Only 5% of the respondents use local brands and most of these consumers belong to lowincome groups and preferred these paints because of their low cost. Accordingly, the DG concluded that the relevant product market in the present case has been delineated as “market for manufacturing and sale of decorative paints by the organised sector” . With respect to the relevant geographic market, the DG noted that the condition of competition for the decorative paints industry is homogeneous throughout the country, and therefore, the whole nation is the relevant geographic market. Accordingly, the relevant market for the purpose of assessment of market power in the present matter has been delineated by the DG as “market for manufacturing and sale of decorative paints by the organised sector in India” .
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relevant market. Thus, the DG observed that Asian Paints may have the largest market share, but the economic advantages of other players–existing and prospective– pose strong competitive threats to the market leader.
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investigation has considered and examined the relevant factors enumerated in Section 19(4) of the Act, including market share, number of firms, size and resources of the firm, countervailing buyer power, barriers to entry, ease of expansion vertical integration, and financial strength of the competitors.
i. No denial of market access : The DG stated in its report that Asian Paints, the market leader, was able to make a net addition of 401 and 816 dealers during 2019–20 and 2020–21 (total of 1217) against the new entrant JSW Paints’ net addition of 722 and 869 dealers during the same period (total 1591). Therefore, the fact and figures of net addition of dealers during the relevant period contradicts the allegation of denial of market access to JSW Paints, as it was able to add more new dealers to its network than the market leader, Asian Paints. The DG found that even the allegation of dealers of being under pressure from Asian Paints not to deal with JSW Paints is not substantiated, as the percentage of dealers who discontinued their relationship with Asian Paints is much higher for Asian Paints in terms of new additions, and vice-versa for JSW Paints. The DG concluded that JSW Paints was able to appoint more dealers compared to even the market leader, Asian Paints. Therefore, the allegation regarding denial of market access pertaining to the distribution network is not supported by the facts. This belief gains further credence with the disparity in the number of dealers claimed to be engaging with both Asian Paints (654) and JSW Paints (1378). The allegation further stood depreciated in view of the fact that only 15 dealers, out of 1378 allegedly common dealers (taking the higher estimate), came forward and levelled allegations against Asian Paints. Further, none of the 15 dealers submitted enough evidence to substantiate their allegations, so that contravention could be legally demonstrated.
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JSW Paints seemed to be a dispute regarding the extension of Carrying and Forwarding Agent and logistics services between the parties to the agreement. The DG, however, noted that there was a possibility of Asian Paints influencing the submissions of Mrs. Kalebudde. The investigation revealed that there was no evidence on record to indicate that the lease agreement entered into by JSW Paints for its warehouse at Hubli was terminated at the instance of alleged pressure by Asian Paints. Therefore, the allegation regarding denial of market access to infrastructural facilities is also not supported by evidence on record.
Vertical restraints under Section 3(4) of the Act :
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the period of 13 months (6 months before and after start of the dealers’ business with JSW Paints).
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Consideration of Investigation Report by the Commission
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and reply to the submissions made by the Opposite Party latest by 08.04.2022 and provide a copy of each of their objections/reply in advance to the Opposite Party.
Suggestions/objections/submissions of Asian Paints
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conduct, the Commission may leave the issue of relevant market or dominance open. Without prejudice to above, it has been further stated that the relevant market in the present case should include all manufacturers and sellers of decorative paints, including waterproofing products and solutions, given the homogenous conditions of competition, uniform rules and laws applicable to all dealers and the substitutability of products. It has also been stated that the space between organised and unorganised players has blurred and there is no separate unorganised sector. All players selling decorative paints in the market impose competitive constraints on each other and are subject to the same rules and regulations. Accordingly, the relevant market be defined as “ market for manufacture and sale of decorative paints in India ”. Asian Paints cannot operate independently or affect competitors or consumers or the relevant market in its favour. The fact that integration and expansion initiatives have been successfully launched by other competitors, as identified by the investigation, undermines the allegation of Asian Paints’ dominance in such a competitive industry. With respect to the allegation of dominant position enjoyed by Asian Paints, it has been stated that, though the investigation has noted that holding the market leader as dominant on the basis of market share may not be correct, it has considered Asian Paints dominant solely for the purpose of assessing its alleged conduct. The investigation has not made any conclusion of dominance of Asian Paints. It has merely presumed Asian Paints’ dominance to proceed further to review its alleged abusive conduct. It has been stated that, given that there is no abusive conduct, the Commission may leave the question of dominance open. It has been stated that Asian Paints faces competition from new entrants, with evidence of at least five new players in last 20 years, faces expansion efforts by existing players, lacks the advantages of vertical integration possessed by JSW Paints and Grasim and faces significant constraints from dealers who exercise significant countervailing buyer power. Accordingly, Asian Paints is not dominant by any measure in any given market. Asian Paints has concurred with the findings of the DG in relation to abuse of dominant position to state that Asian Paints has not abused any hypothetical dominant position. Asian Paints has not abused its alleged dominant position with respect to denying JSW Paints access to the dealership network or infrastructural facilities. It has been stated that JSW Paints has been able to add more dealers than Asian Paints in 2019–20 and 2020–21, which refutes the allegation of denial of access. Asian Paints has concurred with the findings of the investigation that it has not denied access to any paint company, including JSW Paints to
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infrastructural facilities. It has been stated that Asian Paints’ dealings with its dealers have been fair and reasonable, and Asian Paints has reduced the credit limits or not serviced orders where there have been objective reasons for doing the same. With respect to Case No. 17 of 2021, Asian Paints agreed with the findings of the DG that the dealer’s tier was changed on the basis of objective factors and restored again. It has been further stated that there has been no foul play on the part of Asian Paints with respect to servicing of its orders. It has been stated that the audio/video recordings are manipulated. With respect to allegations pertaining to vertical restraints imposed by Asian Paints upon the dealers, Asian Paints stated that it has not entered into any anti-competitive agreements with its dealers or hindered them from conducting business with any other paint company of their choice.
Suggestions/objections/submissions of JSW Paints
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discontinued dealing with JSW Paints in FY 2020–21, out of which 201 were common dealers (80.4%). It has been submitted that the DG has failed to investigate this key allegation of returning the tinting machines of JSW Paints and failed to record any reasons for the same. The only observation from the DG in this regard comes under the analysis of Asian Paints’ action under Section 3(4), where it has been observed that the 15 dealers have not been able to submit any evidence to show that Asian Paints forced them to return the tinting machine, whereas JSW Paints had submitted details of 107 dealers who discontinued dealing with JSW Paints despite investing in tinting machines. The lack of depth in the DG’s investigation is also evident from the fact that the DG placed reliance on Mrs. Kalebudde’s submission that she was willing to lease the property to JSW Paints as on the date of her response (23.12.2020) if the CFA and logistics business is allocated to her firm. It has been stated that her offer does not affect or offset any monetary/reputational loss which JSW Paints had to face in April– May2019. The fact that Asian Paints attempted to disrupt the operations of a new entrant, JSW Paints, by manipulating a warehouse owner to rescind her agreement with JSW Paints was enough to return a finding against Asian Paints.
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and Section 3(4)(d) of the Act. For example, imposing unfair restrictions on dealers to not to deal with JSW Paints and punishing such dealers by stopping supplies/withdrawing support/withholding incentives, if they continue to procure supplies from JSW Paints, also results in an arrangement covered under Section 3(4)(b) and Section 3(4)(d) of the Act, and the restrictions imposed by Asian Paints have caused AAEC in the relevant market under Section 19(3) of the Act as the business practices of Asian Paints have created barriers for a new entrant and Asian Paints’ actions are also aimed at driving competitors out of the market. Nippon, in its submissions before the DG, stated some instances where certain dealers doing business with market leaders refused to deal/supply with Nippon decorative paints. For the sake of brevity, the suggestions/objections/submissions of JSW Paints would be dealt with by the Commission appropriately while analysing the case on merits.
Submissions/objections/submissions of Balaji Traders
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that the DG failed to reach a proper conclusion on how discretionary tiers are being used by Asian Paints to punish dealers who do not comply with the conditions of exclusivity.
Analysis and findings of the Commission
Issue 1: Whether Asian Paints is liable for contravention of provisions of Section 4 of the Act.
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case is defined as “ market for manufacture and sale of decorative paints by the organised sector in India ”.
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Table1 : Market Shares of Players in the Paints Industry (CMIE Database)
| Name of the firm | 2014–15 | 2015–16 | 2016–17 | 2017–18 | 2018–19 | 2019–20 |
|---|---|---|---|---|---|---|
| Asian Paints Ltd. | 40.85 | 41.54 | 40.56 | 37.35 | 37.61 | 38.99 |
| Berger Paints India Ltd. | 13.38 | 12.93 | 11.9 | 12.59 | 12.64 | 12.98 |
| Kansai Nerolac Paints Ltd. |
12.78 | 12.75 | 11.42 | 11.61 | 11.07 | 10.5 |
| Akzo Nobel India Ltd. | 8.42 | 7.5 | 7.21 | 7.24 | 6.67 | 6.09 |
| PPG Asian Paints Pvt. Ltd. |
2.54 | 2.42 | 3.02 | 3.2 | 2.95 | 2.73 |
| Indigo Paints Ltd. | 0.29 | 0.37 | 0.72 | 1.06 | 1.26 | 1.44 |
| Esdee Paints Ltd. | 1.55 | 1.62 | 1.42 | 1.46 | 1.44 | 1.44 |
| Jotun India Pvt. Ltd. | 1.13 | 1.2 | 1.03 | 1.22 | 1.15 | 1.27 |
| Asian Paints PPG Pvt. Ltd. |
1.04 | 1.09 | 0.91 | 1.08 | 1.11 | 1.14 |
| Sheenlac Paints Ltd. | 0.47 | 0.44 | 0.44 | 0.45 | 0.99 | 0.98 |
| Shalimar Paints Ltd. | 1.66 | 1.44 | 0.99 | 0.72 | 0.73 | 0.86 |
In this respect, the Informant has stated that, from FY 2012–19, Asian Paints’ market share has been consistently around 60–70%, and the closest competitor (Berger) holds only around 10–15 % of the market share. Reliance has been placed upon the case of Kapoor Glass Private Limited vs. Schott Glass India Private Limited (Case No. 22 of 2010) , wherein the Commission observed that the market share of Schott Glass was much larger than its closest competitor and remained high over a period, which was indicative of the position of strength of Schott Glass. Reliance has also been placed upon the guidance on the Commission’s enforcement
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priorities in applying Article 82 of the EC Treaty to abusive exclusionary conduct by dominant undertakings to state that higher the market share and longer the period of time for which it is held is an important indication of existence of dominant position. Accordingly, the Informant has submitted that Asian Paints’ market share, which has consistently been higher by almost three times that of the second largest player, Berger, is clear indication of the dominance of Asian Paints. On the contrary, Asian Paints has submitted that the DG’s assessment is not indicative of dominance in any manner and market shares are only one of the factors to assess the dominance of an enterprise. Asian Paints has also placed reliance on certain decisions of the Commission in support of its submissions. The Commission, however, notes that Asian Paints has consistently held a market share in the range of 40% for the period 2011–12 to 2020–21 in the market of paints and varnishes, based on revenue, as per the CMIE database, which shows that it is an undisputed leader. The Commission further notes not only is the market share of Asian Paints large but there is also a big disparity between its share and those of its largest competitors, i.e., Berger, Kansai Nerolac and Akzo Nobel, which is evident from the table below:
Table 2: Market Share of Players in Paints and Varnishes Segment (CMIE
Database)
| Rank | Companies | 2011– 12 |
2012– 13 |
2013– 14 |
2014– 15 |
2015– 16 |
2016– 17 |
2017– 18 |
2018– 19 |
2019- 20 |
2020– 21 |
|---|---|---|---|---|---|---|---|---|---|---|---|
| 1. | Asian Paints Ltd. |
40.33 | 40.24 | 40.5 | 41.15 | 41.83 | 40.87 | 37.59 | 37.92 | 39.24 | 40.96 |
| 2. | Berger Paints India Ltd. |
13.32 | 13.27 | 13.07 | 13.48 | 13.02 | 11.99 | 12.68 | 12.75 | 13.06 | 12.98 |
| 3. | Kansai Nerolac Paints Ltd. |
13.87 | 13.46 | 12.51 | 12.87 | 12.84 | 11.51 | 11.68 | 11.16 | 10.57 | 9.85 |
| 4. | Akzo Nobel India Ltd. |
9.68 | 9.64 | 9.23 | 8.48 | 7.56 | 7.26 | 7.29 | 6.73 | 6.13 | 5.44 |
| 5. | P P G Asian Paints Pvt. Ltd. |
2.85 | 2.53 | 2.56 | 2.43 | 3.05 | 3.22 | 2.97 | 2.8 | 2.41 | |
| 6. | Indigo Paints Ltd. |
0.2 | 0.22 | 0.27 | 0.29 | 0.37 | 0.73 | 1.07 | 1.27 | 1.45 | 1.63 |
| 7. | Esdee Paints Ltd. |
1.65 | 1.57 | 1.56 | 1.56 | 1.63 | 1.43 | 1.47 | 1.45 | 1.45 | 1.44 |
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| 8. | Asian Paints P P G Pvt. Ltd. |
1.26 | 0.98 | 1.05 | 1.09 | 0.92 | 1.09 | 1.12 | 1.15 | 1.21 | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| 9. | Jotun India Pvt. Ltd. |
1.52 | 1.23 | 1.14 | 1.14 | 1.21 | 1.03 | 1.22 | 1.16 | 1.28 | 1.07 |
| 10. | Sheenlac Paints Ltd. |
0.47 | 0.45 | 0.44 | 0.45 | 1 | 0.99 | 1.03 |
Thus, the Commission is in agreement with the Informant that Asian Paints’ market share has been consistently higher by almost three times than that of Berger over a very long period of time, which is indicative of the dominant position enjoyed by Asian Paints in the relevant market. It is also noteworthy that not only a has consistently high market share been held over a considerable length of time but also that other competitors have not been able to increase their share and the gap between Asian Paints and its competitors have been almost steady. The Commission has also taken note of the report on the paints sector by Nirmal Bang, dated 01.09.2020, which was relied upon by the DG. As per the said report, Asian Paints is India’s largest paint company, commanding over 40% of the overall domestic paint industry and 55% in domestic decorative paint industry as against second largest paints company, Berger Paints, which commands 12% market share of the overall paint industry and over 20% market share of the domestic decorative paints segment. Thus, the competitors based on their market shares do not appear to have posed any competitive constraints on Asian Paints during these periods.
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said period (Asian Paints’ closest competitor). JSW Paints has further stated that superior financial strength, large dealer network and increase in number of tinting machines indicate Asian Paints’ market strength. It has been stated that Asian Paints increased its active distribution/dealer network from 53,000 dealers in FY 2017–18 to 70,000 in FY 2020–21. In comparison, Berger only has over 25,000 dealers across India. Further, Asian Paints also increased the number of its tinting machines from 35,000 in 2017–18 to 46,000 in 2019–20. Asian Paints has a strong brand name as well as a vast distribution network which provides it an advantage over its competitors. The Commission notes that Asian Paints has the largest revenue of Rs. 17,194.1 crores and largest number of dealers (more than 70,000) for FY 2019–20 compared to its competitors. Berger, its closest competitor, has a revenue of Rs. 6,366 crores, which is about1/3rd the revenue of Asian Paints for FY 2019–20. If the resources in terms of number of dealers are compared, Berger has around 25,000 dealers, which is again about 1/3rd the size of the dealers with Asian Paints. The following table shows the relative strength of Asian Paints vis-à-visits competitors:
Table 3: Strength of Asian Paints and its Competitors
| S. No. |
Name of Company |
Revenue (Rs. Crores) 2019-20 |
Decorative Paints Segment (latest) |
Number of Depots/War ehouses (latest) |
Number of Dealers (latest) |
|---|---|---|---|---|---|
| 1. | Asian Paints | 17194.1 | 83.7% | 135 | 70000+ |
| 2. | Berger Paints | 6366 | 90% | 129 | 25000+ |
| 3. | Kansai Nerolac | 4943.2 | 55% | 104 | 25000+ |
| 4. | Akzo Nobel | 2661.8 | 60% | 52 | 9000+ |
| 5. | Indigo Paints | 624.79 | 64% | 44 | 13214 |
The Commission notes that the DG in its report has also observed that Asian Paints is so deep-rooted with dealers across India that even its nearest competitor is less than half of its network.
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Limited, Nippon and Indigo entered the market in the years 2010, 2006 and 2000, respectively. As regards the exit of players from the market, JSW Paints has stated that Sherwin Williams, which is the second largest paints company in the world by revenue, had exited the decorative paints business in the year 2013 by selling its business to Berger Paints. Further, it has been stated that the top four players, i.e., Asian Paints, Berger Paints, Kansai Nerolac and Akzo Nobel, have always held 80% of the market share in the organised decorative paints market segment. It has been further stated that manufacturing and distribution of paints is a cost-intensive business, which includes initial cost of setting up business, marketing costs, etc. As per JSW Paints, other entry barriers include development of an extensive distribution network through long-term relationship with dealers, ability to set up tinting machines, etc . Asian Paints, on the other hand, has relied upon the entry of Grasim, with a capital outlay of Rs.5,000 crores in the decorative paints segment, to show that the market is competitive. Asian Paints has also relied upon the expansion plans of younger competitors like Indigo and Kamdhenu and players like Akzo Nobel to show that there are no barriers to entry or expansion. In this regard, the Commission notes that, for the last 10 years, as per the CMIE data, the paint market has seen the presence of four major players, which are Asian Paints, Berger Paints India Limited, Kansai Nerolac Paints Limited and Akzo Nobel India Limited, with the entry of players like Jotun, Indigo, etc . The Commission notes that players like Jotun and Indigo appear to be small players, and their entry in the recent past do not seem to be of such magnitude and scope so as to pose sufficient competitive constraint upon a large player like Asian Paints. This is corroborated by the market shares of these players, which have only been in the range of 0–2% for the period between 2011–12 and 2019–20 (as is evident from the table referred above). This shows that these players have not been able to garner sufficient market share in the paints market in the last 10 years. The Commission further notes that reliance upon entry of Grasim by Asian Paints, which was revealed in its Annual Report of 2020– 21, is also misplaced. The Commission observes that this has no bearing on the assessment of dominance of Asian Paints in the year for which allegations of abuse were made, i.e., FY 2019–20. Further, the evidence of an international player, Sherwin Williams, exiting the market, sustainability in the paint industry may be an issue.
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leader, was able to make a net addition of 401 and 816 dealers during 2019–20 and 2020–21 (total of 1217) as against the new entrant JSW Paints’ net addition of 722 and 869 dealers during the same period (total 1591). Therefore, the fact and figures of the net addition of dealers during the relevant period contradict the allegation of denial of market access to JSW Paints, as they were able to add more new dealers to their network than the market leader, Asian Paints. The DG concluded that JSW Paints had been able to appoint more dealers compared to even the market leader, Asian Paints. Therefore, the allegation regarding denial of market access pertaining to the distribution network is not supported by the facts. As per the DG, this belief gains further credence given the significant number of dealers engaging with both companies, (654 according to Asian Paints and 1378 according to JSW Paints), as on 31.03.2021. As per the DG, only 15 dealers came forward and levelled allegations against Asian Paints out of 1378 allegedly common dealers (taking the higher estimate). Further, none of the 15 dealers submitted evidence sufficient enough to substantiate their allegations, so that contravention could be demonstrated. With regard to the allegation of denial of market access by Asian Paints by restricting access to infrastructural facilities to JSW Paints, the DG noted that the reason for termination of the lease agreement between Mrs. Sajida Kalebudde and JSW Paints seemed to be a dispute regarding extension of relationship of Carrying and Forwarding Agent and logistics services between the parties to the agreement. The investigation revealed that there was no evidence on record to indicate that the lease agreement entered into by JSW Paints for the warehouse at Hubli was terminated at the instance of pressure exerted by Asian Paints. Therefore, the allegation regarding denial of market access to infrastructural facilities was not supported by the evidence on record.
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Accordingly, Asian Paints submitted that there is no contravention of provisions of Section 4 of the Act.
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which is reflective of Asian Paints’ attempt to cover its tracks as soon as the Commission commenced investigation. It is surprising that the DG did not find violation of provisions of Section 4 of the Act despite holding that RVM seems to be anti-competitive in nature to promote exclusivity.
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subsequent email dated 22.08.2019, written by Mr. Thanvi of JSW Paints addressed to Mr. Parveez Kalebudde, Mr. Thanvi had sought a refund of security deposit and also mentioned the pressure exerted by Asian Paints. Upon perusal of the said emails, the Commission observes that initially, when the commercial contract for leasing of warehouse was breached, JSW Paints “ respected their decision of not going ahead with the leasing of the property ” and just sought a refund of the security deposit. In fact, as per the evidence on record, it appears that the reason for termination of the said lease agreement seems to be a dispute regarding extension of CFA and logistics services between the two parties to the agreement. Therefore, the Commission is of the view that there appears to have existed some interse disputes between JSW Paints and Mrs. Kalebudde, which cannot be attributable to Asian Paints in the absence of any concrete evidence. Thus, the allegation of denial of infrastructural facilities is not supported by evidence on record. Accordingly, the Commission is of the view that no case of contravention of provisions of Section 4 of the Act is made out in the facts of the present case due to lack of evidence on abusive conduct of Asian Paints.
Issue 2: Whether Asian Paints is liable for contravention of provisions of Section 3(4)
of the Act.
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Paints from other dealers to meet customer demand. Certain dealers also claimed that their access to the My Awaaz app was also blocked. Due to blocked access, some dealers were unable to substantiate their claims of stoppage of supplies and non-service of orders. As per the DG, the allegations prima facie appeared to be substantiated by their replies. It was also noticed that two dealers, Amutha Hardware and Kumaraan Hardware, claimed that supplies from Asian Paints were unstable from the time they had obtained dealership of Nippon Paints in July 2018. Given their past experience, they had not focused on the sale of products of JSW Paints despite opting for its dealership. The dealers had also submitted that representatives of Asian Paints came to know of the fact that a given dealer decided to go for a dealership of products of JSW Paints from the presence of the JSW Paints tinting machine at the dealer’s premises. These representatives further threatened dealers with actions such as strict enforcement and reduction in credit limit and stoppage of supplies unless the dealer stops doing business with JSW Paints and returns JSW Paints materials along with its display materials and tinting machines back.
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action taken by Asian Paints was claimed to be well-reasoned, based on objective criteria and uniformly applicable and transparently applied by Asian Paints to protect its business interest. The DG, however, found that, in case of a few dealers, such as Siva Sankara Agencies, Sagar Hardware and Paints and Nayak Traders, though reduction might be justified on merits, substantial reduction in credit limit may not be commensurate with the default in payment and/or going into overdue (OD) by the dealers. But Asian Paints resumed/increased the credit limit of the dealers when they improved their off-take.
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that even though Asian Paints reduced their credit limit for certain objective reasons, as soon as their offtake/credit status improved, Asian Paints restored their credit limit as well. It has been stated that Asian Paints should have commercial freedom to determine its commercial decisions, and the Commission should not spend its valuable time and resources on ascertaining the commercial aspects of Asian Paints business. The practice of Asian Paints with respect to supply and servicing of orders have been justified. Asian Paints did not pressurise or influence any dealer to remove the JSW signage, material or tinting machines. Asian Paints has further submitted that the fleeting observations regarding the Retail Value Maximiser (RVM) programme should not be read as conclusive findings on anti-competitive conduct. In any case, the RVM programme is objectively justified and does not cause any appreciable adverse effect in the relevant market. Asian Paints has reiterated that its dealings with all the dealers have been reasonable and based on objective criteria. Further, according to investigation, the evidence provided by the dealers and JSW Paints appeared to be misleading and created at the behest of JSW Paints. It has been stated that after nearly 1.5 years of investigation, JSW Paints filed a letter dated 21.08.2021, which was purportedly written by one Ram Kumar Mistry (Proprietor of Neelam Hardware, Thane West, Mumbai. As per Asian Paints, JSW Paints had obtained this letter from the dealer without providing the dealer with the true context. It has deployed this tactic with a means to manipulate the dealer into assuming that the letter is a requirement for JSW Paints’ audit team but the company instead used the letter in the ongoing investigation by submitting it to the DG, without any consent from the dealer or even informing the dealer that it is doing so. On 25.11.2021, the dealer wrote to the DG dismissing the allegations against Asian Paints and shared the same with Asian Paints setting out the context why the letter dated 21.08.2021 was written. Thereafter, Asian Paints had submitted a voluntary affidavit from the said dealer stating that the said dealer was coerced and manipulated to issue the letter dated 21.08.2021.
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diktats of Asian Paints and continued to deal with JSW Paints. As per JSW Paints, the focus of investigation should have been upon dealers who succumbed to the pressure of Asian Paints and stopped dealing with JSW Paints. The DG has failed to take into account the detailed evidence submitted by JSW Paints regarding the dealers who fell prey to the pressure exerted by Asian Paints and stopped dealing with JSW Paints. Many such dealers had to stop dealing with JSW Paints despite depositing initial confirmation cheques. JSW Paints had submitted a list of 107 dealers who invested in JSW Paints tinting machines but had to completely stop dealing with the company. JSW Paints also submitted a list of 13 dealers who purchased the JSW Paints tinting machines but were not able to use them. JSW Paints had also submitted detailed reasons as to why these dealers did not install the tinting machine. JSW Paints has stated that the fact that such a larger number of dealers refused to even come forward to call out Asian Paints’ abusive practices itself demonstrates the fear of a giant like Asian Paints among dealers, as paint dealers are small ‘mom and pop’ stores and any coercive action by Asian Paints impinges on the daily livelihood of such dealers. JSW Paints had also explained to the DG that most of the dealers are scared of Asian Paints and are afraid of coming forward against Asian Paints, as any coercive action by Asian Paints would result in losses which such dealers cannot bear. Instead of taking such dealers into confidence, the DG decided to not even attempt to investigate these dealers and simply relied on Asian Paints’ submissions on how it decided on credit reductions and supply stoppages.
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reduction in credit limits and 9,900 instances of increase/restoration of credit limits across dealers in AP, Telangana, Karnataka and Tamil Nadu between July 2018 to October 2020. On the basis of this data, the DG concluded that the credit limit changes were routine business decisions implemented in view of the dealers’ reduced business/payment overdue with Asian Paints. To investigate the issue of disproportionate credit reductions as alleged by certain dealers, the DG ought to have focused on the instances of total credit block (i.e., reduction of credit limit to Re. 1). The DG should have checked the number/percentage of credit block cases out of the 7,600 instances cited by Asian Paints and the reasons behind such exceptional credit blocks. Such an investigation would have demonstrated that credit blocks were used by Asian Paints to discipline/punish dealers who dealt with JSW Paints against Asian Paints’ will. However, the DG wrongly relied on instances of routine credit limits reduction/variations to dismiss the allegations of dealers who suffered disproportionate credit reductions/credit blocks due to their association with JSW Paints. The DG confirmed that the quantum of reduction in credit limit by Asian Paints with respect to atleast four dealers, namely, Siva Sankara, Nayak Traders, Naga Sai and Sagar Paints and Hardware, was disproportionate. However, the DG failed to investigate the actual reasons for such credit blocks. The multiple instances of Asian Paints’ coercive actions and imposition of restrictions highlighted also amounts to the contravention of Section 3(4)(b) and Section 3(4)(d) of the Act. As per JSW Paints, the restrictions imposed by Asian Paints have caused appreciable adverse effect on competition in the relevant market under Section 19(3) of the Act as the business practices of Asian Paints have created barriers for a new entrant. Asian Paints’ actions are also aimed at driving the competitors out of the market.
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of the alleged business association of dealers with competitor. The Informant has not been able to substantiate otherwise. Thus, the Commission, based on material available on record, notes that there is no concrete evidence of alleged restraints imposed by Asian Paints over the dealers to find contravention of provisions of Section 3(4) of the Act. Accordingly, no case of contravention of provisions of Section 3(4) read with Section 3(1) is made out in the facts and circumstances of the present case.
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the realm of Section 3(4), Section 4 or of both the provisions, as may be applicable. Such prohibited conduct may result in appreciable adverse effect on competition or a likelihood thereof. There has to be evidence which, on balance of probabilities, would point towards a strong entrenched player using tactics to oust a smaller player or even a new entrant to the market (regardless of its size or inherent advantages) by either incentivising or coercing downstream players to boycott or not deal with the new players. In the present case, upon weighing the evidence on record, the Commission is of the view that the balance is not tilted towards JSW Paints. Asian Paints has been able to demonstrate that some of its conduct or practices adopted qua the dealers was in furtherance of its terms of doing business with such dealers and not to keep JSW Paints away from the market. The DG in any case found that the alleged deterrence of dealers with JSW Paints has not fructified in the presence of large number of dealers onboarding to the network of JSW Paints and even dealing simultaneously in products of both Asian Paints and JSW Paints.
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Sd/(Ashok Kumar Gupta) Chairperson
Sd/(Sangeeta Verma) Member
New Delhi
Sd/(Bhagwant Singh Bishnoi) Member
Dated: 08/09/2022
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3 provisions across 1 enactments
Ashok Kumar Gupta
Sangeeta Verma
Bhagwant Singh Bishnoi
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court