Asian Paints Challenges CCI Probe in Bombay High Court Over Alleged Market Abuse

Asian Paints is contesting a CCI investigation for allegedly having abused its conditions of dominance in the market for paints under the auspices of the Bombay High Court. The inquiry was triggered by a complaint from Grasim Industries, a subsidiary of the Aditya Birla Group, on July 1.

In an extraordinary turn of events, the CCI reversed its investigation order the next day in an abrupt change in its position. Initially, the CCI had used similar allegations set forth by JSW Paints as an argument, but in their updated order that describes the prima facie case of dominance of Asian Paints in the relevant market.

On July 3, Asian Paints informed the stock exchanges that it was reviewing the newly revised order and intends to take legal recourse. According to Section 38 of the Competition Act, 2002, the CCI may correct the errors in its orders.

Legal experts say that changes of this nature are not typical. G.R. Bhatia of Luthra and Luthra stated that dominance assessments would need to be time-constrained so that changes in market dynamics may engender a need to correct the order.

The complaint from Grasim was initiated in the year 2019, when it commenced operations in paints. It is alleged that dealers backed out due to retaliatory actions by Asian Paints- Immediate Response Actions to block Grasim’s market entry. Subsequently, JSW Paints acquired Grasim’s paint business and raised similar issues.

Earlier, however, the CCI dismissed JSW’s allegations, saying that the actions of Asian Paints were normal business practices, not something which was aimed at ending competition. One cannot be guilty of misusing the position, and the same is the case with holding a dominant market position.

The DG has now been instructed by the Commission to independently investigate the matter without any reference to previous findings, thereby indicating that the case will be decided purely on present merits.

This legal battle is significant in the development of competition law in India, with the glaring trends of increasing scrutiny over market leaders and a rare instance of CCI withdrawing its own findings.