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What is Token

The Competition Commission of Pakistan (CCP) has issued show cause notices to sixteen paint companies for deceptive marketing practices by misleading end consumers about the price of the paint packs, which is prima facie violation of Section 10 of the Competition Act, 2010.

The Director General Legal/Registrar CCP Ikram-ul- Haq Qureshi issued show cause notices to the paint companies here on Thursday. The companies which have been issued the show cause notices are the following: M/s ICI Pakistan (Ltd), M/s Nippon Paint Pakistan (Pvt) (Ltd), M/s Kansai Paint (Pvt)(Ltd), M/s Berger Paints Pakistan (Ltd), M/s Brighto Paints (Pvt)(Ltd), M/s Diamond Paint Industries(Pvt)(Ltd), M/s Mansoor Paint Industries, M/s U.P Paint Industries (Pvt) Ltd, M/s Nelson Paint Industries, M/s Chawla Chemical and Metal Industries (Pvt) Ltd, M/s Brolac Paints (Pvt) (Ltd), Karss Paints Industries (Pvt)(Ltd), M/s Allied Paint Industries, M/s Sika Paint Industries (Pvt) (Ltd), M/s Rafiq Polymer Industries and M/s Black Horse Paints. These SCNs were issued.

The show cause notices were issued after it was brought to the notice of the CCP during advocacy sessions held with the Consumer Association of Pakistan, that paint manufacturers were hiding tokens or redeemable coupons in paint packs. Upon preliminary investigation of the matter, the CCP found that the practice of putting tokens is a monetary incentive not to the buyer but the painter, ranging from approximately Rs 20 – Rs 500 varying with the size of the paint pack and depending on the brand. Typically, the painter gets the token as it is concealed at the bottom of the paint pack. The painter then encashes the token from a shop or company outlet while the end consumer/buyer bears the price of the paint pack without any knowledge of the token. However many of the undertakings maintain that the token is intended for the benefit of the end consumer.

This non-disclosure of important information amounts to the distribution of misleading information as to the price of the paint packs. Based on these preliminary findings, in its show cause notices the CCP has stated that the paint companies were misleading end consumers related to the price of the paint in terms of clause (b) sub-section (2) of Section 10 of the Act. The aforementioned paint companies have been asked to submit their written arguments within fourteen days and to appear before the Commission on August 25, 2011.

It is the responsibility and obligation of the CCP under the Act to ensure free competition in all spheres of commercial and economic activity and to protect consumers from anti-competitive behaviour and deceptive marketing practices. Since some of the undertakings gave the assurance that they will start disclosing the presence of the token, owing to CCP’s compliance oriented and conciliatory approach a lenient view will be taken towards them.

According to the show cause notice, through the marketing practice of placing tokens in the Paint, the units makes its consumers believe that the price of the paint paid by the consumer to the shopkeeper is the true price, however, the actual position is different. This non-disclosure of important information constitutes withholding of the information regarding the price of the paint.

Therefore, the undertakings are called upon to show cause in writing, within 14 days of this show cause notice and to appear and place before the Commission, facts and material in support of their contention and avail the opportunity of being heard either in person or through an authorised representative on August 25, 2011 at the office of the Commission, show cause notice added.

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