CCP imposes Rs5m penalty on Reliance Paints for price-fixing, downstream cartelisation

CCP is mandated to ensure free competition in all spheres of commercial and economic activity, to enhance economic efficiency, and to protect consumers from anti-competitive practices including prohibited agreements.

KARACHI: The Competition Commission of Pakistan (CCP) has imposed a penalty of Rs5 million on Reliance Paints Pakistan for fixing a minimum resale price of its products and making its dealers adhere to a price-fixing agreement – a conduct that is in violation of Section 4 of the Competition Act, 2010.

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

The CCP’s enquiry found that Reliance Paints was in an agreement with its dealers to maintain the resale price through a price control list. The company would cancel the supply of its products and even impose a fine on dealers if they did not sell products at prescribed prices.

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 an 8 per cent monthly discount on the total quantity purchased from Reliance Paints. However, the company would stop the 8 per cent 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 per cent 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 authorised by Reliance Paints.

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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.

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 its commitments. Thus, a penalty of Rs5 million was imposed and the company was directed to immediately stop the practice of price fixing. In the event that Reliance Paints intends to issue a remedial notice with recommendatory prices for its dealers, it shall intimate the commission to determine whether an exemption under Section 5 of the Competition Act is required.

CCP is mandated under the Competition Act to ensure free competition in all spheres of commercial and economic activity, to enhance economic efficiency, and to protect consumers from anti-competitive practices including prohibited agreements.

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