One question being asked by analysts, investors and dealers alike is what marketing strategy will the Asian Paints, market leader in paints industry, have post Competition Commission of India’s (CCI) recent order to probe against the company for unfair business practices based on evidence provided by JSW Paints. One thing is sure the company will not adopt, at least in the short term, aggressive strategy of expanding its dealer network in the country which also may have some impact on its growth. It should be noted that ten cement companies who were held guilty of violating the Competition Act, 2002 for acting in concert to fix cement prices as well as limit and control the production and supply in the market in 2012, went slow and less aggressive in hiking the prices post CCI order which in turn had impacted their profit. Whether Asian Paints too will adopt a similar strategy? This we will know only in due course.
CCI has instructed the Director General to investigate the case and submit report in 60 days. In its complaint JSW Paints had stated that Asian Paints had targeted dealers/distributors/retailers partnering with JSW Paints directing them to stop dealing with JSW Paints, stopping supplies to these dealers, dropping service levels by delaying supplies and deliveries, asked dealers to remove display of JSW Paints products from their retail shelves and dealer signboards, threatened dealers by not allowing discretionary discounts, not inviting them for trips and loyalty schemes, etc. Asian Paints did this through its sale personnel in the relevant regions. JSW Paints believed that it would be denied access to dealers even in these states in the absence of intervention by the Commission and would face the same resistance in other regions as well due to coercive action taken by Asian Paints against the dealers.
With entry of new players, Asian Paints has increased its aggression in recent times in trade and is focusing on gaining market shares even in low priced paints / putty & primers. Government initiatives to formalize the economy have also helped large players such as Asian Paints to gain market shares.