Paint wars: Did Asian Paints abuse its dominant position?

India's paints industry has seen intense competition in the last few years, with the entry of new players like Sajjan Jindal's JSW Group and Kumar Mangalam Birla-led Grasim, threatening to shake up the market, where Asian Paints still dominates with over 50 per cent share.

 

Grasim, which markets paints under the Birla Opus brand, has filed a complaint with the Competition Commission of India accusing Asian Paints of engaging in anti-competitive practices to hamper its growth in the decorative paints business.

 

The CCI orders shed light on some of the allegations. These include allegations that Asian Paints offered additional discounts or incentives to its dealers in exchange for exclusivity and that Asian Paints exercised and enforced de facto exclusivity by threatening dealers against stocking Birla Opus paints.

 

Grasim has also alleged that Asian Paints was reducing the credit limit and revision of service levels for dealers, and increasing and enhancing their sales targets that engage with it, etc.

 

The allegations also state that the incumbent was terminating relations with institutional customers and directing dealers not to use or install tinting machines supplied by Grasim.

 

"In the opinion of the Commission, such conduct being indulged into by the OP (Asian Paints) 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 CCI order states.

 

Asian Paints by restraining its dealers from dealing with its competitors by enforcing exclusivity upon such dealers is found to be in the nature of exploitative conduct, the order further stated.

 

A director general will now investigate the matter and submit a report within 90 days of receiving the order.

 

"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," CCI said in its order.

 

Asian Paints has acknowledged the order and is seeking legal opinion.

 

"The company is currently reviewing the order and will take appropriate legal recourse. The company remains committed to fully cooperating with the CCI during the course of the investigation," it said.

 

Aditya Birla Group's Grasim had made a big entry in the paints sector in 2024, with an investment of ₹10,000 crore.

 

The steel-to-ports conglomerate JSW Group had also entered the space back in 2019. Last week, it entered a definitive agreement to acquire up to 74.76 per cent stake in European paint major Akzo Nobel NV's Indian unit for up to ₹8,986 crore, a move that will strengthen its position to take on incumbents like Asian Paints and Berger as well as deep-pocketed new entrants like Grasim.

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