Should home buyers approach CCI to fight real estate developers?

The world of real estate was taken for a rude shock when Competition Commission of India (CCI) took the biggest real estate developer DLF to the task. The CCI had imposed a penalty of 650 Crores on DLF for unfair trade practices and exploit the homebuyers in multiple ways. Suddenly everyone pained by the pathetic state of real estate industry wanted to approach CCI for their grievance redressals.

The joy was however short lived. Homebuyers soon realized they are just mute spectators to the entire saga. DLF was heavily penalized by the homebuyers got nothing out of it. Although the CCI had redrafted the agreement to make it balanced, the benefits of the same are yet to be seen as the case is sub juice in Supreme Court. Historical data shows 98% of the cases filed with CCI against the developers could not be resolved as the developer did not enjoy a dominant position in the relevant market. We have described the dominant position and relevant market in details below.

A developer can only be tried by CCI when following two conditions are met:

  • It is established that the Company enjoys a dominant position among other players in relevant market
  • The Company is indulged in unfair trade practices.

And when the above facts are established, CCI impose a penalty not more than Ten percent of the average of the turnover for the last three preceding financial years, upon each of such person or enterprises which are parties to such agreements.

Let us try to explain what is CCI and how it function. Why does it make sense not to approach CCI for the matters related to real estate? We will try to keep it less technical so that common buyer can also understand it. The buyer doesn’t get any share of the penalty.

Objectives of the CCI

The Competition Act, 2002 was enacted to provide for the establishment of a Commission to prevent practices having an adverse effect on competition, and to promote and sustain competition in the business environment and to protect the interest of consumers.

CCI has the special power to deal with Anti-competitive agreements.  Any agreement with respect to production, supply, distribution, storage, acquisition or control of goods/provision of services which is anticompetitive is prohibited and void. The Act was enacted with following objectives:

  • Establish a Commission to prevent practices having adverse effect on competition
  • Promote and sustain competition in markets
  • Protect the interests of consumers and more…

What is the Dominant Position?

Dominant position means a position of strength, enjoyed by an enterprise, in the relevant market, in India, which enables it to— (i) operate independently of competitive forces prevailing in the relevant market; or (ii) affect its competitors or consumers or the relevant market in its favor

The foremost issue in any abuse of dominance case is defining the “relevant market”. This is important since dominance, if any, is assessed and analysed only in the perspective of the relevant market. The relevant market comprises of the relevant product market and the relevant geographical market. The attempt of the person bringing forward a case to the CCI is always to define the relevant market in the narrowest possible manner while the Opposite Party always tries to define it in a wide manner. It is on the CCI to view the situation and decide what should be the relevant market, a decision that sometimes becomes very controversial.

Abuse of dominant position under Section 4 (1) and (2)

In technical terms:

1) No enterprise or group shall abuse its dominant position.

2) There shall be an abuse of dominant position

(a) directly or indirectly, imposes unfair or discriminatory—

(i) a condition in purchase or sale of goods or service; or (ii) price in purchase or sale (including predatory price) of goods or service.

(b) limits or restricts—

(i) production of goods or provision of services or market there for or

(ii) technical or scientific development relating to goods or services to the prejudice of consumers; or

(c) indulges in practice or practices resulting in denial of market access  or

In simple terms

To explain it in simple words, only if a developer is capable of influencing other players in the market and he is indulged in unfair trade practices, he shall be tried by the CCI. For example, if DLF charges 18% from the homebuyers as delayed penalty, others may also start charging the same.

Why should home buyers not approach CCI?

It doesn’t matter if the Developer has done 50 wrong things and is indulged in unfair trade practices. When a complaint is filed with CCI, the CCI examines whether the developer enjoys a dominant position under Section 4 of the Act. CCI can only take an action against the developer if they are proved to be dominant. There is no standard procedure to come to a conclusion if the developer enjoys the dominant position in the relevant market or not. It is at the discretion of the CCI.

Case studies

We have studied some cases where the buyers approached the CCI but could not get any favorable judgments. Here are some of the cases that were filed before the CCI and their outcome.

DLF Ltd for Gurgaon:-

Outcome: Accepted. DLF proved dominant in the relevant market and fined for 630 Crores. CCI also modified the agreement between the buyer and the developer to make it balanced.

Current Status: Case is moving it SC at slow speed and the buyer’s have not been passed the benefits of modified agreement.

Unitech Ltd for Noida/Greater Noida:-

Outcome: Rejected.

Jaiprakash Associates and Jaypee Infratech for Noida:-

Outcome: Rejected. Since the group companies are not in a dominant position in the relevant market, the question of examining the alleged abusive conduct does not arise,

Ansal Properties for Greater Noida:-

Outcome: Rejected. “As Ansal Properties does not appear to be in a dominant position in the relevant market, the question of abuse of dominant position by it does not arise

DLF Universal for Delhi:-

Outcome: Rejected. DLF Universal does not appear to be dominant in the relevant market and hence “the question of abuse of dominance by it does not arise”.

Supertech Ltd for Nodia:-

Outcome: Rejected. The dominant position of the opposite party (Supertech) in the relevant market is not made out under section 4 of the Act.

If you look at the pattern, in most of the cases, the commission could not establish the fact that the developer did enjoy the dominant position in the market.

Conclusion

CCI Act is not drafted to take up developers specific issues. In our opinion, it is not worth to file a case against the developers in the CCI and the homebuyers should opt for an appropriate forum such as Consumer Forums or other Civil Courts.

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