India: CCI's Whip On DLF: "Cease And Desist Unfair Trade Practices"

Last Updated: 14 February 2017
Article by Vikrant Rana and Rupin Chopra

Background of Facts

  • In this case1, Ashutosh Bharadwaj was the Informant who had booked an apartment with DLF for a total cost of INR 42,91,000/- which included special location charges of INR 4,60,500/- and parking space charges of INR 3,00,000/-. After this, the parties entered into an Apartment Buyers' Agreement.
  • The Informant alleged DLF of abusing its dominant position by imposing highly arbitrary, discriminating and perverse conditions on the apartment buyers through the Agreement.
  • The Informant also alleged that the terms of the Agreement were lopsided in favour of the Builder Company and that they were non-negotiable. The Informant subsequently alleged violation of Sections 4(2)(a)(i)2 and 4(2)(d)3of the Competition Act, 2002.
  • Therefore, the Informant implored for modification of the clauses of the Agreement and prayed for appropriate compensation to the allottees for delay in delivery of possession of the apartment beyond thirty six months.

DLF's Submissions

DLF's prime contention was that they did not hold any dominant position in the relevant market. They contended that neither the size of an entity nor resources available to that entity alone can determine dominant position in a relevant market.

Further, as per DLF, only factors such as total assets, return on assets, profit after tax, reserves and surplus, net working capital etc. were taken cognizance of, omitting to count in the liabilities and indebtedness of the DLF along with its debt-equity ratio.

Moreover, DLF stated that the consumers were not dependent on the DLF's projects and that they had ample choice to book or purchase apartments and since there was no entry barrier for new developers to enter the market in the relevant period, DLF cannot be said to occupy a position of dominance.

Findings

The issue before the Commission for consideration and determination was whether DLF had contravened the provisions of Section 44 of the Act or not.

DLF had contended that the relevant market would not just be restricted to Gurgaon but include the entire NCR because any forthcoming consumer would consider the entire NCR and not only Gurgaon for the purpose of buying property. However, the Commission was of the view that geographic region of Gurgaon was the appropriate relevant geographic market and not the entire NCR as contended by DLF. In view of this, the Commission allocated the relevant market as the market for 'provision of services for development/ sale of residential apartments in Gurgaon'.

As per CCI, there was no doubt that DLF possessed dominance in residential real estate segment in the geographic region of Gurgaon. The Commission had delved into details of the aspect of dominance of DLF. The CCI observed that the relevant market was the provision of services for development and sale of residential units in Gurgaon and prima facie the DLF appeared to be dominant in the same. Further, the CCI noted that the terms of the Agreement appeared one-sided and such abusive conduct appeared to contravene section 4 (2)(a)(i) of the Competition Act. Thereafter, it was finally concluded that DLF held a dominant position in the relevant market. Considering the assessment done in the previous cases of DLF including Belaire's case5, the Commission concluded that the terms and conditions imposed on the allottees in the instant matters were abusive in nature and DLF had contravened Section 4(2)(a)(i) of the Act.

Order

In exercise of powers under Section 27(a)6 of the Act, the Commission directed DLF to cease and desist from indulging in the conduct which is found to be unfair and abusive in terms of the provisions of Section 4 of the Act. But since a penalty of INR 630 crores had already been imposed on DLF in Belaire's case for the same time period to which the present cases belong, no financial penalty under Section 27 of the Act was imposed.

Footnotes

 1 http://www.cci.gov.in/sites/default/files/012014.pdf

2This Section states that there shall be an abuse of dominant position if an enterprise or a group directly or indirectly imposes unfair competition or discriminatory condition in purchase or sale of goods and services.

3 This clause of the Competition Act, makes conclusion of contracts subject to acceptance by other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts. 

4 Section prohibits the Abuse of Dominant Position.

5 Belaire Owner's Association v. DLF Ltd and Others, Case No. 19/2010 (Supplementary order under Section 27 of the Act) 

6 This Section states that CCI can direct any enterprise or association of enterprises or person or association of persons, as the case may be, involved in such agreement, or abuse of dominant position, to discontinue and not to re-enter such agreement or discontinue such abuse of dominant position, as the case may be. 

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