Track2Realty Exclusive: While the real estate fraternity, legal experts and others had strongly questioned the basis of the CCI order and the enormous penalty of Rs 630-crore levied on the real estate major, the sector itself eventually approached the CCI through its industry associations against the cement cartel. Acting on the sector representatives’ complaints, the CCI imposed a penalty of Rs. 6, 307 crore on 11 cement companies for cartelisation.
While both the DLF and the cement manufacturers have 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 and also clear the concept of relevant markets far as real estate sector is concerned. Reiterating the industry sentiments, Lalit Kumar Jain, President of CREDAI asserts that real estate market is fragmented and very competitive and monopolistic practices can’t even be dreamt of.
Industry body NAREDCO also maintains that what falls under the Transfer of Property Act can not be termed as service and can not be imposed with retrospective effect. Sunil Dahiya, Senior Vice President of NAREDCO questions how a developer could have known on the Act in 2006-07 (when applications were submitted first and agreements were signed) when the Act came into force only in 2009.
“We at NAREDCO are determined to sort it out. We are soon going to meet representatives at various policy level, including the CCI, because we find it to be borne out of trust deficit than abuse of market dominance. We do hope to fill the trust deficit so that such instances are not seen in future,” says Dahiya.
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. Issues like whether a home-buyer from Delhi looks 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. I still maintain that CCI verdict on DLF was overreaching its ambit and very erroneously concluded by CCI,” says Jain.
…..to be continued
