2015 (4) TMI 231 - Commission - Law of Competition

Real Estate Giant Faces Probe for Alleged Unfair Practices and Dominance Abuse in Gurgaon Market.

The Commission determined a prima facie contravention of Section 4 of the Competition Act, 2002, by the Opposite Party, a subsidiary of DLF Limited, in ... Abuse of dominant position by imposing unfair condition in agreement - Contravention of provisions of Section 4 of the Competition Act - Held that:- It is the case of the Informant that some of the clauses of 'the Agreement' are unilateral, one sided and unfair which is violative of the provisions of Section 4 of the Act. Such unfair clauses include the Opposite Party can unilaterally abandon of project without giving any reason to the buyers and its liability is limited to refunding the deposited money with 9 % simple interest; the Opposite Party can alter/modify the building plan, etc. without the consent of buyers; the buyer is required to pay an interest of 15% - 18% per annum for any delayed payment of instalment whereas the Opposite Party is to refund only the amounts received from the buyer without interest or in some cases 9% interest in the event of cancellation of the project, no provision for adequate compensation to buyers in case of failure on the part of the Opposite Party to deliver the possession within the stipulated time; unfair and one sided formation of owners' association by the Opposite Party, etc. Having examined the clauses of 'the Agreement' it appears that some of them are unilateral, one sided and loaded in favour of the Opposite Party. Based on the above, the Commission is of the view that the above said conduct of DLF Group, emanating from its dominant position in the relevant market, prima facie, amounts to imposition of unfair terms and conditions on the commercial office buyers which is anti-competitive as per the provisions of Section 4(2) (a) (i) of the Act.It is a fit case for investigation by the Director General (DG). - The Commission directs the DG for investigation into the matter. Issues Involved:1. Alleged contravention of Section 4 of the Competition Act, 2002 by the Opposite Party.2. Determination of the relevant market.3. Examination of dominance in the relevant market.4. Assessment of alleged abuse of dominant position through unfair terms in the Agreement.Issue-wise Detailed Analysis:1. Alleged Contravention of Section 4 of the Competition Act, 2002:The Informant filed information under Section 19(1)(a) of the Competition Act, 2002, alleging that the Opposite Party, a subsidiary of DLF Limited, abused its dominant position in the commercial real estate market in Gurgaon by imposing unfair conditions on buyers, in violation of Section 4 of the Act. The Informant's family had booked five units of commercial office space in the DLF Corporate Greens project and entered into agreements with the Opposite Party. The primary allegations included unilateral and unfair terms in the Agreement, such as the Opposite Party's right to abandon the project without reason, arbitrary alteration of building plans, and inadequate compensation for delays in possession.2. Determination of the Relevant Market:The Commission defined the relevant market as 'the market for the services of development and sale of commercial space in Gurgaon.' This determination was based on the unique characteristics and consumer preferences for commercial office space, distinguishing it from other real estate products such as residential units or plots of land. The relevant geographic market was identified as Gurgaon due to distinct factors like land availability, commercial real estate prices, and infrastructure facilities.3. Examination of Dominance in the Relevant Market:The Commission examined the dominance of the DLF Group in the relevant market. It was observed that DLF Group had a significant presence in Gurgaon, with numerous commercial projects, including DLF Cybercity and other ongoing developments. Despite the presence of other developers, DLF Group's substantial market share and extensive commercial space projects indicated its dominant position in the market for the services of development and sale of commercial space in Gurgaon.4. Assessment of Alleged Abuse of Dominant Position:The Informant alleged that several clauses in the Agreement were unilateral, one-sided, and unfair, thus constituting an abuse of dominant position. Key unfair terms included:- The Opposite Party's right to abandon the project with limited liability.- The ability to alter building plans without buyer consent.- Disproportionate interest rates for delayed payments by buyers versus refunds by the Opposite Party.- Inadequate compensation for delays in possession.- Unilateral formation of owners' associations.The Commission found that these clauses appeared to be loaded in favor of the Opposite Party and prima facie amounted to the imposition of unfair terms and conditions on commercial office buyers, violating Section 4(2)(a)(i) of the Act.Conclusion:The Commission concluded that there existed a prima facie case of contravention of Section 4 of the Act by the Opposite Party. Consequently, it directed the Director General (DG) to investigate the matter within 60 days and examine the role of the persons/officials of the Opposite Party involved in the alleged conduct. The order emphasized that the observations made were not final expressions of opinion on the case's merits, and the DG was to conduct the investigation independently.