Paint makers: CCP to probe possible deceptive marketing practices

ISLAMABAD: The Competition Commission of Pakistan (CCP) has decided to probe possible deceptive marketing practices being committed by the paint manufacturers, who are making false/misleading claims of selling the best paint/emulsion paints in the country.

A two-member CCP bench has issued an order against one of the leading paint manufacturers.

The investigation against the paint industry has been started after the CCP Bench concluded that M/s Berger Paints Pakistan Limited is making false claims of `No.1 Emulsion in Pakistan’, without any independent study/research or report. However, no penalty was imposed on the said manufacturer due to the timely compliance of the company as per CCP’s directives.

The order released by the CCP revealed that the commission has disposed of proceedings initiated pursuant to Show Cause Notice No.11/22 dated April, 2022 (SCN) issued against M/s Berger Paints Pakistan Limited (respondent company) for prima facie violation of the Competition Act, 2010 (Act). The SCN was issued pursuant to the findings of an enquiry concluded vide enquiry report of February, 2022.

Earlier, the enquiry was initiated on a complaint filed by M/s Diamond Paint Industries (Pvt) Limited (complainant company) alleging that the Respondent had engaged in deceptive marketing practices in violation of the said provisions of Section 10 of the Competition Act.

Background of the case revealed that the CCP received the complaint against the Respondent, alleging that it had engaged in anti-competitive practices by making a substantial and quantifiable claim regarding its product, ie, Berger Super Emulsion as `No.1 Emulsion in Pakistan’, by marketing it on its paint buckets and shade cards without there being any independent study/research or report for supporting the same. The Complainant submitted that such claim is not mere puffery, being a quantifiable claim that is false/misleading. The complaint further alleged that the false/misleading claim, ie, “No.1 Super Emulsion”, has the potential to mislead the ordinary consumer, is also likely to cause harm to the Respondent’s competitors, and the Respondent is in violation of Section 10(2)(a), (b) and (c) of the Competition Act.

The complainant is a private limited company registered under the Companies Ordinance, 1984 (now the Companies Act 2017). The Complainant was of the view that it is engaged in manufacturing high quality decorative and industrial paints in Pakistan.

The Respondent company submitted that it has ceased to advertise the impugned logo/brand in all print and electronic media.

Keeping in view the submissions made by the parties concerned, the material/evidence placed on the record and the applicable law in the matter, the following issue is framed for the purpose of deliberation and determination: Whether the Respondent has resorted to deceptive marketing practices by distributing false and misleading information?

Referring to the deceptive marketing practices, CCP Bench observed that the deceptive marketing practices shall be deemed to have been resorted to or continued if an undertaking resorts to the distribution of false or misleading information that is capable of harming the business interests of another undertaking. The distribution of false or misleading information to consumers, including the distribution of information lacking a reasonable basis, related to the price, character, method or place of production, properties, suitability for use, or quality of goods.

Since the Respondent has agreed to rectify and address the concerns of the Commission and the Complainant during the hearing, it would suffice to dispose of the matter.

The CCP Bench further stated that presenting the impugned logo in the manner used is capable of misleading the ordinary consumer that Respondent’s emulsion is No.1 in the emulsion paint market or that the product is better in ranking as a whole from the other competitors in the market. This, in turn, has the potential to harm the position and ranking of other players in the market, thereby giving the said company an unearned competitive edge. This certainly is capable of harming the business interests of other undertakings.

The CCP Bench ruled that the distribution of the concerned misleading information has led to a violation of Section 10(2)(a)&(b) of the Act by the Respondent. No independent study or research to support the nexus for claiming it to be `No.1’ has been placed on record either. In fact, the company’ stance has been that the term`No.1’ has been used as part of the name of the product and the trademark logo has already been applied for in this regard.

For record, the CCP deems it relevant to clarify that the CCP Bench is not concerned with whether their trademark logo has been registered or not but is rather concerned with the representation of its logo by the Respondent while advertising the product being deceptive in any manner. It is needless to mention here that even if an undertaking has a registered trademark logo under the relevant laws, it would not absolve any party from complying with the relevant provisions of Section 10 of the Competition Act.

The Respondent company has already committed to cease advertising the impugned logo/brand in all print and electronic media.

The Commission has decided not to impose any penalty on the said paint company due to the commitments in the given circumstances.

The CCP bench deems it relevant to observe any alleged practice of a similar nature, ie, using the term ‘No. 1’ by any of the players in the relevant market. in a form or manner which is misleading or deceptive, needs to be stopped and/or rectified forthwith by all undertakings concerned. It needs to be recognized that to avoid any contravention of Section 10 of the Act.