New Delhi, Jul 1 (PTI) The Competition Commission of India (CCI) on Tuesday ordered an investigation against Asian Paints for allegedly abusing its dominant position in the market for manufacturing and sale of decorative paints.

The direction follows a complaint filed by Grasim Industries (Birla Paints Division), which accused Asian Paints of engaging in exclusionary practices aimed at stifling its entry and growth in the Indian decorative paints segment.

"The Commission is of the opinion that a prima facie case of contravention of the provisions of section 4(2)(a)(i), 4(2)(c) and 4(2)(d) of the Act by the OP (Asian Paints) is made out in the present matter," CCI said in the order.

Section 4 of the Competition Act, 2002, prohibits abuse of dominant position.

Accordingly, the fair trade regulator directed the Director General to cause an investigation to be made into the matter and submit an investigation report within a period of 90 days.

Grasim, a part of the Aditya Birla Group, forayed into the decorative paints segment under the 'Birla Opus Paints' brand in February last year. Asian Paints is a market leader and manufactures paints for both decorative and industrial use.

The competition regulator observed that OP (Asian Paints), by way of restraining its dealers from dealing with the OP's competitors like the informant (Grasim Industries Ltd) by enforcing exclusivity upon such dealers, is imposing unfair conditions upon them, which is found to be in the nature of exploitative conduct.

Further, by restraining suppliers of essential raw materials from providing goods and services to the OP's competitors like the informant, as well as by coercing landlords, C&F agents and transporters to refrain from engaging with competitors like Grasim, Asian Paints seems to be prima facie creating barriers to new entrants in the market as well as partially foreclosing competition in the market, it said.

Thus, the conduct of Asian Paints seems to be prima facie causing an appreciable adverse effect on competition in India, the regulator added.

The complainant further alleged that Asian Paints coerced dealers into returning or refusing to install Grasim's tinting machines, which the complainant claimed were technologically superior.

In its response, Asian Paints argued that the Indian decorative paints market is highly competitive with low entry barriers and presence of several regional and multinational players.

It (Asian Paints) also highlighted Grasim's rapid growth since entering the segment, claiming the new entrant had already achieved a high single-digit market share and established a vast network of over 50,000 dealers.

However, the CCI noted that the material placed by Grasim indicated potential abuse of market power by Asian Paints.

The Commission said such conduct by a dominant enterprise could restrict competition and innovation, and hinder consumer choice.

However, the regulator clarified that observations made were not a final view on the case merits and directed the DG to conduct the probe without being swayed in any manner whatsoever by the observations made herein.

In September 2022, CCI dismissed a complaint filed by JSW Paints alleging unfair business practices against Asian Paints with regard to the latter misusing its dominant position and further denying access to the market.

JSW Paints had alleged that after they launched their decorative paints segment, Asian Paints began to pressurise and target the dealers who had agreed to stock and display their decorative paints manufactured by the company. PTI HG HG MR