When the Competition
Commission of India (CCI) alleged that DLF misused its dominant
market position and imposed unfair conditions on home-buyers of two of its many
projects, the real estate fraternity, Legal experts and others strongly
questioned the basis of the CCI order and the enormous penalty of Rs.630-crore
levied on the real estate major. However, now that the
real estate sector itself has approached the CCI through its apex body CREDAI
against the cement cartel, the issue of CCI jurisdiction has yet again
surfaced. The moot point in the real estate sector today is whether the nature
of realty business and its ancillary units fall under the CCI purview and the
logic of CCI in determining the relevant market based on all India sales of
select companies.
While the DLF has challenged the CCI
verdict before the COMPAT, real estate companies, Legal experts
and industry bodies are keenly awaiting the tribunal to define the jurisdiction
of the CCI as clear the concept of relevant markets far as real estate sector
is concerned. The Real Estate Industry asserts that real estate market is
fragmented and very competitive and monopolistic practices can’t even be dreamt
of.
But Adv. R. P. Rathod rightly points out that that the CCI judgment could be used as
a precedent even in the Consumer Courts where there is no dominance and the
litigant has been trying to prove that the agreement is one sided. He further
maintains that if DLF is guilty then there
is also violation of the provisions of various statutes that the government institutions
are actually supposed to administer.
Industry body NAREDCO also maintains that
what falls under the Transfer of Property Act cannot be termed as service and cannot
be imposed with retrospective
effect & also questions how a developer could have known of the Act in
2006-07 (when applications were submitted first and agreements were signed)
when the Act came into force only in 2009. NAREDCO says that they
are soon going to meet representatives at various policy levels, including the
CCI, because they find it to be borne out of trust deficit than abuse of market
dominance. They hope to fill the trust deficit so that such instances are not
seen in future.
The argument of CCI has been that DLF is
dominant in the relevant market and has abused the dominance. To define the
market, CCI has used the product market as well as the geographical market. They said that the product market is high end apartments and geographically,
it is in the Gurgaon area. Using data of all India sales of
housing and construction companies CCI has held that DLF has abused its
dominance in high end residential accommodation in Gurgaon. In light of, this
would be one of the first issues to be challenged.
Therefore, issue like whether a home-buyer
from Delhi look in Gurgaon or NCR, whether secondary sales and investment sales
should be an integral part of the relevant market are some of the issues which
will come up during the appeal hearing.
However, it is quite obvious that the issue
has now gone beyond whether DLF is dominant in the market and has abused the
dominance. The issue is more about the CCI methodology and parameters to define the real estate product market and the geographical
market. The moot point is does the CCI also have jurisdiction over the
nature of trade practices in real estate? After all, the scope of competition
law comes into force generally when there are exclusionary trade practices
which create barriers for the other competing players in the segment. Failing
this, competitive and fragmented nature of the business does not invite any
competition law.
CCI
is meant for controlling malpractices in terms of unfair competition
as defined under the ambit of Act. However, drawing an inference
that it will invite CCI intervention in every aspect of real estate business is
not well founded. Real estate is such a fragmented sector with highly
competitive nature of transactions and hence the developers can never come
under the CCI debates the real estate sector.
If CCI verdict is upheld, it will amount to
all builders are in danger of coming under the jurisdiction
of the Competition Commission. Would the slew of builders across the
country very much be amenable to this kind of interpretation?
Going by the CCI’s
definition of abuse of dominance, HUDA and DTCP, by
virtue of being public bodies, had also facilitated this abuse of dominance by
providing DLF with the necessary ammunition to act in an illegal, unfair and
irrational manner by allotting land and giving licenses, permissions and
clearances to the company despite the evidence that the company was taking
buyers for a ride.
Since its inception in 2003, the Competition Commission of India has
been in the news, and for all the wrong reasons. Members of the judiciary
challenged those provisions of the Act that they perceived to be an
encroachment into their jurisdiction. In particular, they questioned the
legality of the clauses under which the government could exclude members of the
judiciary while considering candidates for heading the CCI.
The big question today which remains
unanswered till the time a final verdict
on CCI
penalty over DLF comes out in the open. Whether this CCI will
now regulate the real estate across the board or the jurisdiction of the CCI
only knocks in selective manner only time will tell concludes Adv. R.
P. Rathod.
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