Sri Balaji Traders vs Competition Commission Of India & Ors
Facts of the Case
In an appeal filed under Section 53B of the Competition Act, 2002, the appellant, a partnership firm called Sri Balaji Traders, contested the Competition Commission of India’s (CCI) ruling dated September 8, 2022. The information against Asian Paints Ltd. filed under Section 19(1)(a) of the Act was rejected by the ruling. (Respondent No. 2) alleging contravention of Section 3(4) and Section 4 of the Act. Sri Balaji Traders, classified as a “Critical Retailer (CR)” by Asian Paints since 2010, alleged that its CR status was revoked after it took a dealership of JSW Paints (Respondent No. 3) on 24 February 2021. Asian Paints’ Territory Sales Officer visited the Appellant’s shop and allegedly informed them that their CR status had been revoked as of 27 April 2021. The Appellant claimed this revocation was a retaliatory step due to its association with a competing brand, JSW Paints. The Appellant further stated that they were left with dead stock worth ₹3.5 lakh, specifically base shades meant for CR mixing, which could not be used after the downgrade. Although the CR status was restored in June 2021, the Appellant argued that the revocation had caused financial loss and reputational harm. The Appellant also sought to club the matter with another case (Case No. 36 of 2019) already under investigation for similar allegations against Asian Paints and requested a cease-and-desist order, interim relief, and penalty under Section 27 of the Act.
Issues
Whether the downgrade of the Appellant’s retailing tier by Asian Paints amounted to an abuse of dominant position under Section 4 of the Competition Act?
Whether Asian Paints used its discretionary retailer tier system to impose vertical restraints or deter competition from JSW Paints, in contravention of Section 3(4) read with Section 3(1) of the Act?
Whether the CCI was justified in dismissing the information filed by the Appellant despite restoration of CR status prior to the formal complaint?
Arguments of the Appellant
The Appellant alleged that Asian Paints abused its dominant market position by abruptly downgrading their CR (Channel Relationship) status after they began selling JSW Paints products, claiming this was retaliatory and aimed at deterring competition. Though the CR status was reinstated in June 2021, the Appellant maintained that the downgrade led to commercial dislocation, stock losses, and reputational harm from April to June 2021. They claimed that they had attempted to lodge the complaint on 25 June 2021 but, owing to a technical problem with the payment, it was officially filed on 1 July 2021. The Appellant highlighted that restoration of CR status cannot exculpate Asian Paints of previous anti-competitive behaviour and contended that they were not afforded an equal opportunity to submit evidence during the investigation. They also stressed that proceedings under the Competition Act are in rem, addressing broader public interest and not just individual grievances.
Arguments of the Respondents
The Competition Commission of India (CCI) considered the Director General’s (DG’s) report, which had held that the downgrade resulted from deteriorating sales performance and was not connected to the Appellant’s relationship with JSW Paints. The CCI identified that CR status is based on objective metrics such as offtake and turnover, and that the status was reinstated on 23 June 2021, prior to the formal filing on 1 July 2021, a detail the Appellant omitted to mention. Asian Paints argued the Appellant did not come with clean hands, deliberately omitting key facts. They submitted that the downgrade was consistent with long-term performance metrics from October 2020 to March 2021 and highlighted past tier changes (2014–2023) based on similar criteria. Asian Paints also noted that other dealers selling JSW Paints were not downgraded, disproving allegations of retaliatory action. They concluded that the DG’s findings and CCI’s decision were proper, and the Appellant had sufficient opportunity to submit further information but failed to do so.
Judgment
The National Company Law Appellate Tribunal (NCLAT) has confirmed the findings of the Competition Commission of India (CCI), holding that there had been no contravention of Section 4 or Section 3(4) read with Section 3(1) of the Competition Act, 2002 by Asian Paints. Upon consideration of the Director General’s report and evidence, the Tribunal concluded that Sri Balaji Traders downgrade from “Critical Retailer” (CR) to “Colour World” category was on account of a consistent reduction in offtake between October 2020 and March 2021, and not on account of Appellant’s link with JSW Paints. It held that Asian Paints applied its retailer tiering system uniformly based on objective performance metrics such as sales history, projections, and customer outreach. The Tribunal further noted that other dealers associated with both Asian Paints and JSW Paints had not been downgraded, disproving claims of retaliatory conduct. Critically, NCLAT condemned the Appellant for failing to disclose that their CR status had already been reinstated on 23 June 2021, before the formal complaint was filed on 1 July 2021, amounting to concealment and false representation. It held that the Appellant did not approach the forum with clean hands and had ample opportunity, over five months to present evidence but failed to do so. As a result, the Tribunal dismissed the appeal, affirmed the legality of the downgrade decision, and found no merit in the allegations of anti-competitive behaviour.