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Lame Excuses for Token

The Competition Commission of Pakistan (hereinafter the “Commission”), upon
reference and concern expressed by the Consumer Association of Pakistan took notice of
the marketing practice in the paint industry of inserting redeemable coupons (hereinafter
“token(s)”) in paint packs used for household purposes, falling in the decorative paints
category. The Commission took notice of the fact that the televised adverts and
packaging of the paint packs did not give any indication of the presence of token in these

packs. It seemed that the said practice targeted directly the painters while the end
consumers bear the price and are not made aware of the placement of token inside the
paint pack in the absence of any formal disclosure on the relevant product.

The Commission sought clarifications from the Undertakings as to whether due
disclosures were being made regarding the tokens, detailed information pertaining to the
value of tokens in the paint packs and appropriate reasoning as to what benefit is being
passed on to the consumer who is paying for the product and what value addition exists
for such consumer. Briefly the clarifications offered by the Undertakings are as under;

 

ICI Paints
In its letter dated June 5, 2011 ICI admitted to the practice of putting tokens in its
Maxilite and Paintex Brands totaling nine varieties of paint with the token values ranging
from Rs. 45- Rs. 400 depending on the size of the container and quality of the paint. It
submitted that it had been engaged in this practice since the mid- 1990s and tokens
inserted in the paint containers serve the following purposes:
(a) ensure that the retailer (the Company‟s customer) is discouraged from selling fake
or counterfeit paint to the consumer;
(b) provide the consumer assurance of the Company‟s product; and
(c) serve as a second line of defense against spurious products by ensuring that the
retailer is accountable to the customer.

Nippon Paints
In its letter dated June 13, 2011 and subsequent letter dated June 21, 2011 Nippon
admitted to the practice of putting tokens in eleven brands totaling twenty one varieties
with token values ranging from Rs. 55- Rs. 440 depending on the size of the container
and quality of the paint. It submitted that when it entered the market in 2007 all major
market players were engaged in this practice, hence they were forced to introduce tokens
in their products in 2009. It was further stated that no disclosures were being made about
the presence of the token and that this tool is targeted towards the painter and in most
cases it is the painter who gets the benefit.

Kansai Paints
In its letter dated June 1, 2011 Kansai admitted to the practice of putting tokens as
being an accepted trade norm, in eight varieties of paint with token values ranging from
Rs. 27.5- Rs. 220 depending on the size of the container and quality of the paint. It was
stated that there was no mention on the product packaging, brochures and flyers
regarding the tokens in the paint packs but the painters, customers and paint dealers are
fully aware of these values. It was submitted that the benefit being passed on to the
consumer is that he gets a discount on the labor costs of paint application, as the painter
generally adjusts his labor cost with the customer against the value of the token.
However, should the customer choose to avail this benefit he may also do so by opening
the packs personally.

Berger Paints
In its letter dated June 10, 2011 Berger admitted to the practice of putting tokens
in paint packs and that no disclosure of the presence of the token was being made on the
product/advert. Berger stated that according to Section 11 (1) of the Punjab Consumer
Protection Act 2005 regarding duty and disclosure “where the nature of the product is
such that the disclosure of its component parts, ingredients, quality, or date of
manufacture and expiry is material to the decision of the consumer to enter into a
contract for sale, the manufacturer shall disclose the same” the company was not under
duty to disclose information like the presence of token in the paint pack. It was denied
that any deceptive marketing practices had taken place under Section 10 of the Act as it is
not misleading as no disclosure is required under the law. Detailed information regarding
the value of tokens was not provided. It was further stated that the benefit passes on to
the consumer who is paying for the product of a particular category which contains token
unknown to the consumer through cost reductions.

Brighto Paints
In its letter dated June 28, 2011 Brighto admitted to the practice of putting tokens
in paint packs and that no disclosure of the presence of the token was being made on the
pack. It was argued that it is an incentive for the buyer who opens the pack and finds the

coupon which is en-cashable at any shop/outlet of their products. It was submitted that
the requisite detail pertaining to the value of tokens cannot be provided as their value
keeps changing from time to time; however, the value ranges from Rs. 25- Rs. 200.

Diamond Paints
In its letter dated June 29, 2011 Diamond admitted to the practice of putting
tokens in seventeen varieties of paint packs and that no disclosure of the presence of the
token was previously being made on the pack/advert. It was stated that major sale of their
decorative paints is through paint contractors who usually quote “with material” prices so
the benefit goes to the end consumer directly and that this practice is well known to all
consumers/buyers and they can get their token redeemed from any of the company‟s
buyers.

Marvel Paints
In its letter dated June 30, 2011 Marvel admitted to the practice of putting tokens
in paint packs ranging from Rs. 20- Rs. 400 and that no disclosure of the presence of the
token was being made on the pack/advert. It was stated that the reason for putting these
tokens was to give the buyer an incentive to purchase the product and the whole benefit
goes to the buyer.

Silver Sand Paints
In its letter dated July 1, 2011 Silver Sand admitted to the practice of putting
tokens in twelve varieties of paint packs ranging from Rs. 50- Rs. 300 depending on size
of paint pack and quality of paint and that no disclosure of the presence of the token was
being made on the pack/advert. Silver Sand submitted that the ultimate benefit of this
practice is for the end consumer/ buyer since on opening the pack he finds a coupon
inside on which the amount of the coupon is clearly mentioned.

Nelson Paints
In its letter dated June 29, 2011 Nelson admitted to the practice of putting tokens
in some of the products as a means to promote sales and that no disclosure of the

presence of the token was being made on the pack/advert. Nelson submitted that benefits
of this practice are two fold- paint contractors who usually provide paint services “with
material” take possession of the token inside while negotiating their prices, hence the
benefit goes to the consumer directly and consumers/buyers are well aware about the
redemption procedure of the token.

Chawla Paints

In its letter dated June 30, 2011 Chawla admitted to the practice of putting tokens
in paint packs ranging from Rs. 20- Rs. 200 and that no disclosure of the presence of the
token was being made on the pack/advert but details have been provided to dealers.
Chawla submitted that the benefit is for the consumer of the goods who opens the pack
and then goes and gets the token encashed. It was submitted that in order to survive in the
presence of multinational giants the company was forced to use the same marketing tool
as these giants.

Happilac Paints 

In its letter dated June 30, 2011 Happilac admitted to the practice of putting
tokens in paint packs ranging from Rs. 20- Rs. 300 and that no disclosure of the presence
of the token was being made on the pack/advert. The benefit is for the consumer of the
goods who opens the pack and then goes and gets the token encashed. It was stated that in
order to survive in the presence of multinational giants they were forced to use the same
marketing tool as they do.

Gobi Paints 

In its letter dated June 30, 2011 Gobi admitted to the practice of putting tokens in
paint packs ranging from Rs. 20- Rs. 400 and that no disclosure of the presence of the
token was previously being made on the pack/advert. It was further stated that Gobi sells
their paint through dealers who quote “with material” prices so the benefit is for the
consumer of the goods.

Sparco Paints

Imran Alvi and Associates on behalf of Sparco in its letter dated July 25, 2011
admitted to the practice of putting tokens in paint packs ranging from Rs. 25- Rs. 200 and
that no disclosure of the presence of the token was being mentioned on the label because
the value of these schemes keeps on varying from time to time. Sparco denied that
deceptive marketing had taken place and stated that the false or misleading
representations mean making performance representations which are not based on
adequate tests, misleading warranties and guarantees, false or misleading ordinary selling
price representations, untrue misleading or unauthorized use of tests and testimonials,
bait and switch selling double ticketing and the sale of a product above its advertised
price and non disclosure of required information that allows consumers to make informed
decisions. It was further stated that providing incentive of rebate on certain products is
not prohibited and certainly not deceptive marketing and that the benefit goes to the
buyer and end consumers only.

Upon review of the televised advertisements of the undertakings it was found that
no disclosures were being made of the presence of the token or the value of the token.
The Commission also purchased paint packs to serve as evidence of the undertakings that
failed to provide specific details of the value of token and to assess whether disclosures
are made on the paint pack including Marvel, Berger, Brighto, Chawla, Brolac, Happilac,
Black Horse and Kingfisher. No disclosures were made on the paint pack and it was
found in each case that the token card was concealed at the base of the paint pack
underneath the paint where only the painter involved directly in the application of the
paint can have access to it.

The strategy of putting tokens is targeted directly at the painter who is fully informed about the value
of tokens in different paint packs owing to experience in the industry. Consumers are
largely unaware of this marketing tool, the benefit of which is accrued to the painter.

 

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