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CCP imposes penalty on paints company

Islamabad: The Competition Commission of Pakistan (CCP) has imposed a penalty of Rs 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, conduct that is a violation of Section 4 of the Competition Act, 2010.
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 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 fine the 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 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 authorised by Reliance Paints.
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 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 intends to issue a remedial notice with recommendatory prices for its dealers, it shall intimate the Commission for determining 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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