Competition Commission Orders Probe against Asian Paints’ Alleged Market Dominating Tactics
The Competition Commission of India (CCI) has asked its director general to initiate an investigation against Asian Paints Ltd under the provisions of section 26(1) of the Competition Act, 2002, based on information received from JSW Paints Pvt Ltd.
 
In its 14 January 2020 order, the CCI bench of Ashok Kumar Gupta (chairman), Sangeeta Verma and Bhagwant Singh Bishnoi, both members, noted that "...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. A stipulation that appears to create barriers to entry and restricts choice of consumers is likely to result in appreciable adverse effect on competition resulting in higher prices for consumers."
 
"Based on material available on record, the Commission is of the view that evidence provided by JSW Paints is prima-facie sufficient to indicate that Asian Paints has 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, appears to be in contravention of provisions of Section 4(2)(c) of the Act," the order says.
 
The Commission then directed its DG to investigate the matter and submit reports within 60 days. 
 
In its complaint, JSW Paints has alleged that immediately after the launch of its decorative paints, Asian Paints began pressurising dealers who had agreed to stock and display decorative paints manufactured by the Jindal group company. 
 
"Asian Paints targeted dealers, distributors and retailers partnering with JSW Paints directing them to stop dealing with JSW Paints, stopping supplies to these dealers, dropping service levels by delaying supplies and deliveries, asked dealers to remove display of JSW Paints products from their retail shelves and dealer signboards, threatened dealers by not allowing discretionary discounts, not inviting them for trips and loyalty schemes. Asian Paints did this through its sale personnel in the relevant regions. Such conduct has been alleged to have created fear amongst retailers and dealers, as a result of which a number of them stopped dealing with JSW Paints, despite having provided the initial cheque of Rs1 lakh," JSW Paints had said.
 
The complaint filed by JSW Paints also cites allegedly similar tactics used by Asian Paints against Nippon Paint India Pvt Ltd. It says, "Asian Paints had taken punitive action against a dealer in the past on account of its decision to stock and sell paints manufactured by Nippon Paint. Asian paints is stated to have resumed its supplies only after the dealer agreed to cease business relations with Nippon. In the year 2015-16, Nippon had attempted to enter the decorative paints market in Chennai. However, Asian Paints took similar action against the dealers who entered into commercial relationship with Nippon."
 
As per the information, decorative paints constitute 74% of the market sales. Industrial paints comprise general industrial, automotive, protective powder coatings, and coil coatings constitute 26% of the market sales.  
 
In its order, the CCI observed sales of decorative paints require extensive dealer networks, especially in the rural and semi-urban markets; hence, a strong supply chain and pan-India distribution is essential for making products successful. Brand also plays an important role in the decorative paints segment. Within the decorative paints segment, consumers prefer branded products in the organised sector rather than unbranded products of the unorganised sector, it noted.
 
The Commission noted that Asian Paints is the largest player in the relevant market. As per the information, Asian Paints has the highest market share based on all parameters including revenues, earnings before interest, taxes, depreciation, and amortisation (EBITDA) and installed capacity. Based on revenue, it has a market share of 55.92%, with the second player, Berger Paints being at 18.79 % for the FY17-18.
 
It has also been stated that Asian Paints has 60,000 dealers and 135 depots across the length and breadth of the country. The next competitor is Berger Paints at second place with 25,000 dealers and 129 depots.
 
There are four top operators in this industry, namely, Asian Paints, Berger Paints, Kansai Nerolac, Akzo Nobel, who have occupied around 80% of the relevant market, with Asian Paints maintaining its highest market share consistently over the years. Based on this, the Commission noted that Asian Paints prima-facie appears to enjoy a dominant position in the relevant market delineated above.
 
In a regulatory filing, Asian Paints says "The company is currently examining the order and will take appropriate legal recourse and will extend full co-operation to CCI in the matter."
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    COMMENTS

    Ibrahim Sakarwala

    8 months ago

    Asian paints controls a huge chunk of the paints market. Why does it need to even bother about a company which is practically unknown. Many do this to get free publicity and thereby utilize such stunts as marketing gimmicks. Having said this.... Even if we consider something like this must've happened..... It will be impossible to prove it in a court of law

    Amazon aims to pacify small traders with $1bn SMB bet
    Amazon's $1 billion commitment to empower small and medium businesses (SMBs) in India is Jeff Bezos' attempt to change the e-commerce giant's perception among small businesses which are in a retaliatory mode, industry experts said on Wednesday.
     
    Bezos announced that the e-commerce major, through its global footprint, will help SMBs export products worth $10 billion by 2025.
     
    This move is seen as a measure to calm the growing unrest and protests going on under the aegis of the Confederation of All India Traders (CAIT).
     
    "Amazon wants to make sure that the current perception of the company among the small businesses go away, else this will further call for strict scrutiny from the regulators and protests from small traders," Satish Meena, Senior Forecast Analyst with Forrester, told IANS.
     
    Over the next five years, Amazon will invest $1 billion to digitise micro and small businesses in cities, towns and villages across India, helping them reach more customers than ever before, announced Bezos.
     
    According to Meena, this is in line with what Amazon is planning to do in India for the next few years.
     
    "They need partnerships with SMBs for products to cater not only to the Indian customers, but also to customers outside the country," he said.
     
    Amazon said it would establish 'Digital Haats' in 100 cities and villages to help businesses integrate into the digital economy.
     
    According to Prabhu Ram, Head, Industry Intelligence Group (IIG), CMR, SMBs in India account for 45 per cent of industrial output, creating employment for 60 million Indians and roughly 1.3 million jobs annually. 
     
    "The SMBs, however, are constrained by multiple challenges, including access to skills, talent, finance, and most importantly, digital outreach," Ram told IANS.
     
    "This is where SMB-centric initiatives, such as Amazon's commitment, are a welcome initiative to digitally support SMBs, enabling them to gain knowledge, reach their target audience, achieve scale, and while doing so, be able to measure their growth metrics," Ram said.
     
    In the end, added Meena, SMBs in India also need handholding in product development, capital investment and access to market.
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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    Ritesh Agarwal says 'sorry' as Oyo set to fire more staff
    More staffers at Indian hospitality unicorn Oyo are set to be fired as the company trims its workforce across verticals, Ritesh Agarwal, the CEO, wrote in a letter to the employees.
     
    This comes amid reports that the company has let go about 1,200 employees in India "and plans to shed a similar number in the next four months".
     
    "One of the implications of the new strategic objectives for 2020, is that, like the leadership team, we will reorganise more teams across businesses and functions.
     
    As a result, we are asking some of our impacted colleagues to move to a new career outside of Oyo," Agarwal wrote in the letter on Monday.
     
    According to reports, SoftBank has given Oyo a deadline of March 31, 2020 to phase out contracts or businesses, which are not EBITDA-profitable. 
     
    "It's been almost two weeks since the New Year started. As we enter 2020 together, I'm writing to update you on our strategy which OYO leaders agreed upon when we came together for the 2019 Global Leadership Meet in December. We had a single-point agenda -- to plan on how OYO will continue to drive its success in 2020 and beyond."
     
    According to Oyo, it is lying off poor performers and has set up a "meritocracy-based" performance evaluation programme, reported said on Monday.
     
    "This has not been an easy decision for us. We are doing everything we can to ensure that our outgoing colleagues receive as much assistance and support as possible through this transition. 
     
    "Every OYOpreneur is important to OYO and ensuring their well-being both during and after their tenure is our number one priority. I want to thank them for their efforts and apologise for the impact this is causing. One is an OYOpreneur forever and we will always be grateful for your efforts," Agarwal added.
     
    Oyo is currently the second top unicorn after Paytm and valued at nearly $10 billion in the country.
     
    Founded in 2013, Oyo's self-operated business includes Oyo Townhouse, Silverkey, Collection O, Oyo Flagship and Oyo Homes and ancillary businesses include Weddingz.in.
     
    SoftBank's Vision Fund has so far invested about $1.5 billion in Oyo, pushing the hospitality company's valuation to $10 billion but learning from WeWork fiasco, the Japanese conglomerate is now looking at the companies it financially back from a different lens. 
     
    Also backed by Airbnb Inc., Sequoia Capital and Lightspeed Venture Partners, Oyo currently works with 10,000 hotel owners in the country.
     
    A New York Times report recently quoted current and former Oyo employees as saying that the company was "indulging in questionable business practices". 
     
    The article claimed the "SoftBank Jewel in India" is facing toxic culture and troubling incidents. "While Ritesh Agarwal's Oyo aims to be the world's biggest hotel chain, its growth was fuelled by questionable practices, employees said," the report said.
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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    COMMENTS

    Newme

    8 months ago

    I don\'t understand why they bought a hotel in Las Vegas. Now running out of money.

    Meenal Mamdani

    8 months ago

    "Every OYOpreneur is important to OYO and ensuring their well-being both during and after their tenure is our number one priority.......One is an OYOpreneur forever and we will always be grateful for your efforts,"
    Looks like Agarwal has learnt the Americanese of hyperbolic statements that usually mean little.
    OYO also says "... it is lying off poor performers and has set up a "meritocracy-based" performance evaluation programme." So this puts the blame on employees rather than admit that even the best performing employee could be let go because the company is running out of money.
    Rather than chase this hyperbolic identity of Unicorn, entrepreneurs should have their feet firmly on the ground and refuse money being poured into their enterprises if the enterprise is still finding its niche.

    Sanjai

    8 months ago

    This was expected sooner or later as businesses do not run merely on freebies.

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