Background of the Case:

A circular sent by Reliance Paints to its dealers, retailers, and distributors stated that those who would sell the products at prices fixed by the company would get 8% monthly discount on the total quantity purchased from Reliance Paints. However, the company would stop the 8% monthly discount on the first complaint against a dealer for any variation with the prescribed price. The second complaint would result in an annual discount of 5% only. The third complaint would result in the termination of the dealership agreement. The circular also told dealers not to sell its products to other dealers except to those authorized by Reliance Paints.

Akzo Nobel Pakistan Ltd. sent a formal complaint to CCP alleging that Reliance Paint was fixing the minimum resale price for its products and also monitoring and penalizing the dealers/distributors/retailers for non-compliance with its price directives.

The enquiry report concluded that these practices were restricting competition not only between the dealers and retailers but also between Reliance and its competitors as the retail price became inflexible and no discounts could be offered by dealers to consumers for Reliance’s products.

Order:

The Commission noted that the case essentially pertained to the vertical restrained perpetuated by the Respondent with its dealers or distributors / retailers. The Respondent was operating at the vertically ‘upstream level’ of production of paint and allied products while its dealers or distributors / retailers were operating at the vertically ‘downstream level’ of distribution and sale of products to end-consumers. The product market was determined to be the market for the dealers or distributors / retailer of the Respondent’s paint products. The relevant geographic market was defined as the whole of Pakistan.

The Commission held that the there was no evidence on record which proved that the Respondent had given mandatory instructions to its dealers to cease from taking up the dealership of competing manufacturers or supplier of paint as a whole, and therefore, merely requesting its dealers not to sell its products to dealers not authorized by the Respondent does not amount to a violation of Section 4 of the Competition Act.

The Commission further held that Respondent had evidently imposed upon its dealers a minimum resale price to sell its products which constituted a violation of Section 4 of the Act as such arrangements were restrictive of the intra-brand competition and price fixation by their object. The Respondent would cancel the supply of its products and even fine the dealers if they did not sell products at prescribed prices.

The bench noted that the Act in general, and Section 4 in particular dictated that the buyers / resellers must remain free to determine their resale price.

The Competition Commission of Pakistan (CCP) imposed a penalty of PKR 5 million on Reliance Paints Pakistan for fixing a minimum resale price of its products and making its dealers adhere to a price fixing agreement, which it found to be in violation of Section 4 of the Competition Act, 2010.

Although Reliance Paints had violated Section 4 of the Competition Act by fixing the retail price of its products, the Commission took a lenient view because of the commitments the company filed to address competition concerns. Thus, a penalty of PKR 5 Million was imposed and the company was directed to immediately stop the practice of price fixing. In the event that Reliance Paints intended to issue a remedial notice with recommendatory prices for its dealers, it was to intimate the Commission for determining whether an exemption under Section 5 of the Competition Act was required.

CURRENT STATUS:

Reliance Paints filed appeal before CAT challenging the order. Matter is subjudice before CAT