The Competition Commission of India (CCI) has initiated an investigation into Asian Paints Ltd regarding allegations of abusing its dominant position in the decorative paints market. This move comes after Grasim Industries, operating through Birla Opus Paints, alleged that Asian Paints has been employing unfair practices to maintain its market dominance. The CCI’s decision to probe is based on claims that Asian Paints offered special incentives to dealers to secure sales exclusivity, thereby stifling competition.
Grasim Industries, a new entrant in the paint market, contends that Asian Paints’ practices include offering additional discounts and incentives, such as foreign travel, to dealers who agree to exclusive sales agreements. This situation reportedly places dealers selling competing products at a disadvantage, as they face reduced credit limits and higher sales targets. The CCI’s preliminary review suggests that these practices could unfairly hinder competition and raise barriers for new market entrants like Birla Opus Paints.
“The Commission directs 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. At this prima facie stage, the Commission, in light of the material available on record, finds no reason to hear the OP before passing the present order,” the CCI said its order.
Following its initial assessment, the CCI has appointed a Director General (DG) to carry out a comprehensive investigation into the allegations. The DG has a 90-day deadline to submit a final report. “Nothing stated in the present order shall tantamount to final expression of opinion on the merits of the case and the DG shall conduct the investigation without being swayed in any manner whatsoever by the observations made herein,” stated the antitrust regulator, emphasising the impartial nature of the ongoing investigation.
The investigation process is designed to ensure a thorough examination of the claims, allowing the CCI to determine the validity of the allegations. This thorough approach underscores the seriousness with which the CCI is treating these allegations, aiming to uphold fair market practices.
According to data from the Centre for Monitoring Indian Economy (CMIE), Asian Paints held the largest market share in the country in FY23, with a percentage of 39.05%. Berger Paints followed in second place with a market share of 12.13%, while Kansai Nerolac Paints and Akzo Nobel India held the third and fourth positions with market shares of less than 10% each.
Allegations have been made by Birla Paints that Asian Paints is pressuring suppliers to withhold raw materials from Birla Paints. In a specific incident cited by Birla Paints, Asian Paints organized a vendor meet in October 2023 at ITC Maratha Bombay, which was attended by over 150 top vendors of Asian Paints.
In an evolving paint market increasingly competitive due to new entrants like Birla Opus, the CCI’s investigation into Asian Paints could have significant implications. The presence of new players has intensified the competition, compelling existing companies to reassess their strategies. As the market dynamics shift, the CCI’s probe aims to uphold fair competition and ensure that no single player can establish undue dominance through anti-competitive practices.
