Disclosure of tokens in products: All paintmakers have fully complied with order: CCP

ISLAMABAD: The Competition Commission of Pakistan (CCP) has conducted a survey of the paint industry and declared that all the paint manufacturers have now fully complied with the commission's directions to disclose the presence/insertion of tokens in their paint products.

The CCP has passed a new order after conducting three extensive surveys and holding several hearings to see whether the paint manufacturers have stopped hiding the presence of tokens in the paint products.

While following up on its previous order passed against top paint manufacturers in 2012, the CCP has passed a fresh order on the paint sector.

Though the CCP has not imposed any penalty on the paint manufacturers for their ultimate compliance with the Competition Law, the order made it clear that should any concerns in deceptive marketing practices in the paints industry be brought to the knowledge of the commission, stern and definitive actions will follow under the law, the CCP's new order stated.

The CCP issued show cause notice to the 11 leading paint manufacturers companies for non-compliance with the commission's order dated 13 January 2012 issued for contravention of Section 10 of the Competition Act, 2010.

According to the CCP order of 2012, the commission took notice of the marketing practice in the paint industry of inserting redeemable coupons in paint packs used for household purposes falling within the category of decorative paints.

At that time, it was noted that the televised adverts and physical packaging of the paint packs did not provide any indication in respect to the presence of redeemable tokens within.

In other words, while paint retailers/painters enjoyed discounted prices on a particular product, the consumer was left to buy the same at a price unencumbered by the token.

The commission vide its order dated 13 January 2012 concluded: the practice of Omission of material information with respect to the tokens in paint packs amounts to misleading consumers, hence, it is deceptive and in violation of Section 10 of the Competition Act.

The following directions were issued to the eleven paint manufacturers at that time: (i) The promotion material or advertisements of the decorative paints to be modified to disclose the presence and the prize value of the token on each pack for the consumer.

ii) The disclosure should be made with bright colours distinct from the colour of the packaging.

iii) The paint manufacturers will issue four advertisement/public notices of A4 Size during 60 days period making due disclosure to the public regarding the presence and price value of the token.

iv) The public notice may be published individually or on a collective basis by the paint manufacturers.

v) A compliance report with respect to the implementation of the aforementioned directions must be filled by the paint manufacturers.

For the purpose of identifying and examining the compliance of the paint manufacturers, the commission has conducted multi surveys in the relevant market under section 28 of the act so that any non-compliance with respect to the commission's order may be identified and subsequently rectified in order to promote competition within in the realm of the paint industry.

In this regard, the first survey was conducted in December 2013, wherein, it was revealed that out of the total 15 paint manufacturers companies, only four companies were in compliance with the paint order. The fact that the first survey report found companies in partial compliance of the commission's directions and was not completely in line with the directions of the commission issued with the matter.

So proceedings under Section 38 of the Act were initiated for non-compliance of the paint order against the 11 paint manufacturer companies. Show cause notices were issued to 11 paint manufacturers in this regard.

During the first and second hearings held on June 16 and June 24, 2015, the paint manufacturers provided the commission with documents pertaining to the efforts being made to ensure compliance with the commission's order and further assured/promised complete compliance in respect to the directions within the paint order.

The commission conducted a second survey on 31 March 2016 for the determination of an accurate status in respect to the adherence of the Commissions directions and found that out of 11 paint manufacturers, five of the paint manufacturers satisfied the requirements of the survey report, and in turn, the directions of the Commission within the paint order and the rest six were still failing to fully comply the Commissions directions.

The Commission 3rd and 4th hearing proceedings were held in March 2017, and the bench raised concern in respect to the availability of the old products within the market, which could still be utilized to the detriment of the consumer as they have not been modified in line with the instruction of the Commission. In this respect, the bench allowed further six-month time for the elimination of old stock present within the market.

The third survey was conducted during the time period of December 2017-January 2018, and as per the survey report, the remaining six paint manufacturers were still found to be non-compliant with the directions of the Commission.

Fifth, sixth and seventh hearings were held on 16 December 2018, 13 December 2018, and 10 September 2020, respectively, and the findings of the 3rd survey report were regarded against the assertions of the paint manufacturers and the companies present continued to allege full compliance with the directions of the Commission with the paint order.

Moreover, it was argued that it was humanely impossible to trace out and replace all old stock (stock not modified with the directions of the Commission) present within the market. It was further argued that the survey reports, which the Commission is using as a reference point for the determination of the compliance, do not represent the specific percentage of compliance being taken up by each paint manufacturer.

The Commission provided an opportunity to the respondents of being heard on September 10, 2020 upon reconstitution of the bench, and the respondents were directed to provide verifiable compliance reports, which were then analyzed along with all documents available on record, compiled by virtue of the Commissions extensive and comprehensive approach in the instant matter, against the backdrop of the Commission direction within the paint order. After the Commission has concluded, the respondents in the instant case are now entirely in compliance with the Commissions directions within the paints order.

The CCP's order said that the mandate of the Commission is to encourage compliance and promote a 'competition culture' within the region.

The paints order dated 13 January 2012 found the respondents to have been in violation of Section 10 of the Act, as they were involved in Deceptive Marketing Practices of including redeemable tokens within paint packs without adequately disclosing this practice to the end consumer, thereby hampering free competition in the market. The purpose of this order is to ensure compliance with the Paints Order so that healthy competition prevails within the paint industry.

The CCP's new order concluded that the respondents are not liable to be penalized under Section 38(1)(b) of the act for the non-compliance of the commission's directions within the paint order.-SOHAIL SARFRAZ