Violation of Sec 10 of Competition Act: CCP imposes Rs1m token penalty on Nelson Paint

ISLAMABAD: The Competition Commission of Pakistan (CCP) has passed an order and keeping in view the commitment and cooperative behaviour, penalised M/s Nelson Paint Pakistan (Private) Limited with a token penalty in the sum of Rs 1 million for violation of Section 10 of the Competition Act, 2010.

The said company was using deceptive claims in their marketing material that their product provided protection against Covid-19. A two-member comprising the CCP Chairperson Rahat Kaunain Hassan, and Member Mujtaba Ahmad Lodhi, passed the order.

However, keeping in view the commitments made by M/s Nelson Paint that it has discontinued deceptive marketing practices and shall not repeat any such activity in the future, the Bench took a lenient view and imposed only a fixed token penalty of PKR one (01) million, to deter companies from engaging in deceptive marketing practices, importantly, where it relates to health or safety claims.

The Bench also directed M/s. Nelson Paint to withdraw any or all batches of the products that may have been sold or are still available in stock with their distributors and to inform its distributors or buyers regarding the inefficacy of the subject claims. M/s. Nelson Paint was strongly reprimanded to avoid deceptive marketing practices in the future.

M/s Nippon Paints Pakistan (Private) Limited sent a formal complaint that Nelson Paint was distributing false and misleading information to consumers through social media about their products. The complainant cited two major claims that were allegedly violative of Section 10, i.e. “Nelson Extra Stainless (Covid-19 Protection)” and “Nelson Extra Klick Special Matt Enamel (Covid-19 Protection).” M/s Nelson Paint was alleged to have taken undue advantage of the prevalent health concerns at the time of the COVID-19 pandemic and attempted to increase its sales through false slogans.

The alleged deceptive marketing practice by M/s. Nelson Paint attracted invocation of Section 10 (2) (a) & (b) of the Competition Act, 2010 which protects the business interests of other undertakings, as well as, consumers from misleading information. CCP initiated an enquiry to investigate the complaint.

During the enquiry, M/s Nelson Paint contended that it manufactured the impugned anti-bacterial paint, which contains a substance called Benzalkonium Chloride (BKC) that provides protection against microbes and bacteria and the Products are duly checked by the Pakistan Council of Scientific & Industrial Research Laboratories Complex. It further claimed that the anti-bacterial efficiency of its product was 99.9 percent and it has performed all necessary tests after the development of the products.

After analysing the findings of the enquiry and hearing the arguments of parties involved, the Bench held in its order that BKC substance is only against bacteria and microbes, but not against viruses, in particular Covid-19. Furthermore, the documents relied upon do not adequately mention the effective role of BKC in paint products, hence it does not substantiate the alleged claim, ie, protection from Covid-19.

The Bench observed that health and safety claims are always looked at heedfully by the Commission. There is a higher bar on the undertakings making such claims and they must substantiate their claims using competent and reliable scientific evidence.

The Bench held that the marketing practices of M/s Nelson Paint, when taken holistically, are to the prejudice and injury, not only of the consumers but, also to other businesses, hence, in violation of Section 10(2) (b) along with Section 10(2) (a) of the Act.

Copyright Business Recorder, 2022