-Shivam Garg [i]
The case[ii], deals with Abuse of Dominant Position by DLF and its subsidiaries in Residential Real Estate Sector in Gurugram Region. Section 4 of the Competition Act discusses the same, which provides 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”[iii].
The order deals with relevant product market and relevant geographic market using its earlier orders. The Restrictive clause in Flat Purchase Agreement and Delay in Completion of Project is Abuse of Dominance.
Facts of the Case
- The informant, Mr Ashutosh Bharadwaj had booked an apartment with DLF, by signing an Apartment Buyer’s Agreement for amount Rs 42,91,000/- (Inclusive of Special location charges of Rs 4,60,500/- and parking space charges of Rs 3,00,000/-.) in the OP Housing Project, Gurgaon[iv].
- The flat was not handed over within stipulated time. Further, OP demanded higher sums from him.
- The Informant thus filed this complaint to CCI alleging DLF of abusing its dominant position by imposing highly arbitrary, discriminating and perverse conditions on the flat purchasers through the Apartment Buyer’s Agreement.
- The terms of Agreement are on bare perusal appears to be one sided.
- Mr Ashutosh, thus, alleged violation of Sections 4(2)(a)(i) and 4(2)(d) of the Competition Act, 2002. It further prayed to modify the Agreement’s discriminating clauses and adequate compensation for the delay of delivery of possession.[v]
Arguments on behalf of Defendant (DLF)
- DLF did not hold any dominant position in the relevant market ( DLF contended to include whole NCR in relevant market)
- The size of entity and available resources does not determine the dominant position in relevant market.
- The authorities failed to take into account its liabilities, indebtness and its Debt-equity ratio, while calculating its resources[vi].
- The Flat purchasers have variety of option to book and purchase Flat and they are not solely dependent on DLF builders. Further, there is no entry barrier for new builders.
Findings of Commission
- The contention of DLF that expanded the relevant market[vii] to NCR apart from Gurgaon is unjustified. The geographic region of Gurgaon is appropriate relevant geographic market.
- There is no doubt that DLF possessed dominance in residential apartment sector in Gurgaon area.
- The terms of agreement appeared one sided and thus appear to contravene Section 4(2)(a)(i) of the Competition Act.
The Commission has power under Section 27(a) of the Competition Act. They directed DLF to “CEASE & DESIST” from acting or involving in any such conduct which is found to be unfair and abusive in nature as per Section 4 of the Act.
There is no monetary penalty, considering that already Rs 630 Crores penalty has been imposed on DLF in the case of Belaire[viii] for conduct during same period to which this matter refers.
The order by learned Commission on whether DLF contravened the Section 4 of the Competition Act, tries to bring the uniformity and precedence in its earlier order. The Commission refers to Case no 13 and 21 of 2010 and Case no. 55 of 2012, where it pointed out in its opinion that technicality on relevant product market need not be dwelled into if the dominance of the enterprise remains the same even in alternate relevant market decision.[ix] One of the major reason to follow strictly those definition is that the issue in present matter is pertaining to same time period and region. It further refers to Belaire’s Case[x], and opined that secondary market will be not considered while defining relevant product market.[xi] Thus, drawing inference the commission believes that there is no need to shift from relevant product market definition for “provision of services for development / sale of residential apartments.”
The above mentioned resources were also utilized for defining the relevant geographic market.[xii] Commission clearly stated that it cannot expects a person working in Noida or Faridabad to purchase a flat in Gurgaon. Thus, whole NCR cannot be considered in definition of relevant geographic market.
The commission further held that there is no doubt that there is Dominant position in residential real estate sector, specifically in Gurgaon region. The terms of agreement are unfair as clear from analysis done by DG. The following terms are unfair-
- Clause 1.20: The allotee is mandated to compulsorily purchase the parking space.[xiii]
- Clause 8: The OPs are not required to send any notice or reminder for any compliance under the Agreement though for complying with all obligations under the Agreement. Time is of the essence for the allottee.[xiv]
- Clause 11: Schedule for possession of the Apartment[xv]
- Clause 12: Procedure for taking possession[xvi].
- Clause 17: Failure to deliver timely possession[xvii]
- Clause 16: Failure to deliver possession by the Ops[xviii]
- Clause 1.15 and 1.16 and Clause 10: No determination of Super Area, Carpet Area, etc.[xix]
- Clause 1.8: Change in preferential location of the Apartment due to change in lay-out plan.[xx]
- Clause 4: Earnest Money Deposit (EMD)[xxi]
The order thus, highlights how the previous order play an important role in matter dealing with same period.
[i] Co Convenor, Centre for Competion Law and Policy and 5th Year Student at National Law University, Jodhpur
[ii] Ashutosh Bhardwaj Vs DLF and Ors., order dated 04/01/201, available at http://www.cci.gov.in/sites/default/files/012014.pdf
[iii] Section 4 of the Competition Act
[iv] Gurgaon as referred in order. New name as per government declaration is Gurugram.
[v] Vikrant Rana and Rupin Chopra, India: CCI’s Whip On DLF: “Cease And Desist Unfair Trade Practices”, available at http://www.mondaq.com/india/x/568058/Antitrust+Competition/CCIs+Whip+On+DLF+Cease+And+Desist+Unfair+Trade+Practices visited on 27/2/2017
[vi] Only factors such as total assets, return on assets, profit after tax, reserves and surplus, net working capital etc
[vii] Provison of Service for development / sale of residential apartments in Gurgaon
[viii] Belaire Owner’s Association v. DLF Ltd and Others, Case No. 19/2010
[ix] Para 6.20 reads as “6.20 The Commission notes that determination of relevant market is important for assessing dominance of the Opposite Party. But defining relevant market is not an end in itself. If the primary reason for defining relevant market is assessment of dominance of a particular enterprise/ market player with regard to that relevant market, the Commission is of the opinion that such exercise can be dispensed with when such assessment remains unchanged in different alternative relevant market definitions. Therefore, when under possible alternative relevant market definitions, the conclusion on dominance remains the same; the Commission finds no reason to get into the technicalities of precisely defining relevant market.”
[x] Supra 8
[xi] Para 12.35 read as” 12.35 …..While “secondary market‟ may have some bearing on the demand and supply variables, it certainly cannot form a part of the relevant market for the simple reason that the primary market is a market for “service‟ while the secondary market is a market for immoveable property. Moreover, while building an apartment, a builder performs numerous development activities like landscaping, providing common facilities, apart from obtaining statutory licenses while a sale in secondary market merely transfers the ownership rights. An individual who is selling an apartment he or she has purchased cannot be considered as a competitor of DLF Ltd. or any other builder/ developer. Nor is he or she providing the service of building/ developing. The dynamics of such sale or purchase are completely different from those existing in the relevant market under consideration. The value added or the value reduced due to usage or otherwise does not even leave the apartment as the same one as had been built or developed by the builder/ developer…”
[xii] Para 6.23read as “6.23….The ‘geographic region of Gurgaon’ has gained relevance owing to its unique circumstances and proximity to Delhi, Airports, golf courses, world class malls. During the years it has evolved as a distinct brand image as a destination for upwardly mobile families. As it has been reasoned out in the order passed by this Commission in the Belaire case, a person working in NOIDA is unlikely to purchase an apartment in Gurgaon, as he would never intend to settle there. Thereafter, the Commission in that order distinguished between buyers looking for residential property out of their hard earned money or even by taking housing loans and those buyers who merely buy such residential apartments for investment purposes; stating clearly that the Commission was not looking at the concerns of speculators, but of genuine buyers. It was therefore, observed that a small 5% increase in the price of an apartment in Gurgaon, would not make a person shift his preference to Ghaziabad, Bahadurgarh or Faridabad or the peripheries of Delhi or even Delhi in a vast majority of cases. The COMPAT’s order, dated 19.05.2014 passed while disposing of the appeals filed against the Commission’s order in the Belaire case, upheld the Commission’s finding on the relevant geographic market to be ‘geographic region of Gurgaon’….”
[xiii] The Government’s Memo No. 7/16/2006-2 TCP dated 19.12.2006 instructs that 1.5 equivalent car space for each dwelling unit should be provided in a group housing colony building. It was noted that this stipulation did not make it mandatory upon each apartment buyer to buy at least one parking space and that by bundling the sale of minimum one parking space with the flat, OPs had put unnecessary financial burden on the allottee
[xiv] one-sided with no responsibility upon the OPs and complete responsibility upon the allottee.
[xv] ample scope to the OPs to modify the time schedule as per its discretion.
[xvi] any default on part of the OPs would have minimum adverse impact on the OPs, whereas in case of any default on part of the buyer, they would be subjected to heavy penalty.
[xvii] The liability in case of delay in delivery, there was a possibility of delaying and/ or not paying anything to the consumer, while in case of delay in making payment by the consumer, there was no escape from making payment at 18% interest per annum. Moreover, in case project was abandoned by the OPs, the liability of OPs was limited to interest @ 6% only.
[xviii] the allottee was deprived of the right to claim any refund/interest when apartment was sold by the OPs
[xix] the final price which allottee were expected to pay, were not known to the allottee
[xx] Preferential location charges were required to be paid upfront, but when the allottee did not get the preferential location, the refund was to be adjusted at the time of last installment, that too without any interest.
[xxi] The DG observed that the right to forfeit EMD without any notice to the allottee was one-sided and unfair.
Disclaimer: This article has been written by a member of Centre for Competition Law and Policy. The article is just an opinion of the Author and no legal consequences follow from the same