BUILDERS/DEVELOPERS ARBITRARY, UNFAIR, UNREASONABLE AND ONE SIDED CONDITIONS AND AGREEMENTS WILL BE UNDER THE PURVIEW OF THE COMPETITION COMMISSION OF INDIA – THE NEW WATCHDOG OF THE REAL ESTATE INDUSTRY


Competition Commission of India`s orders on the Arbitrary, Unfair and Unreasonable conditions by the leading players in real estate industry

All dominant one sided agreements and all unreasonable demands for possession including delay possions by self proclaimed “Biggest Builder” “Largest Builders” “First Brand Builder” will be under the purview of CCI.

The Watch Dog for Real Estate Competition Commission of India has its land mark judgements safeguarded the consumer of Real Estate. In various cases, including DLF case, CCI had issued strict liability to be penalised. Majority of cases were for delays and conceling the fact by Builders about land and projects. There are projects since 2004 till today not completed.

The difference between Consumer Protection Act , Monopoly Restrictive Trade Practices Act and CCI is that later goes for proving dominance of the accused and prove the dominance and monopoly.

Over the last year, there has been a sudden influx of complaints against several property majors mainly for imposing highly arbitrary, unfair and unreasonable conditions on the buyers. This is believed to be a result of the Rs. 630 crore penalty, in a 237-page order that was imposed on what is seen to be the biggest real estate company, DLF in the case of Belaire Owners Association (“Informant”) vs. DLF Limited & Ors. (“Opposite Parties”)13 last August. The fine amounts to a 7% of the company’s average annual turnover in the past three years. This judgement is a powerful tool in the hands of an average property buyer against the developers which has put hundreds of builders in the country on edge as they too have been committing the same offences for many years now. Most complaints that reached CCI cited delay in delivery and biased buyer-builder agreements, which in some cases brings to the front the abuse of power by the said developer.

Under Section 19(4) of the Act, the Commission shall, while inquiring whether the enterprise enjoys dominant position or not under Section 4, have due regard to any or all of the following factors, namely:-
(a) Market share of the enterprise;
(b) Size and resources of the enterprise;
(c) Size and importance of the competitors;
(d) Economic power of the enterprise including commercial advantages over competitors;
(e) Vertical integration of the enterprise or sale or service network of such enterprise;
(f) Dependence of consumers on the enterprise;
(g) Monopoly or dominant position whether acquired as a result of any statute or virtue of being a government company or a public sector undertaking or otherwise;

(h) Entry barriers including barriers such as regulatory barriers, financial risk, high capital cost of entry, marketing entry barriers, technical entry barriers, economies of scale, high cost of substitutable goods or services for consumers;
(i) Countervailing buying power;
(j) Market structure and size of market;
(k) Social obligations and social cost;
(l) Relative advantage, by way of contribution to the economic development, by the enterprise enjoying a dominant position having or likely to have an appreciable adverse effect on competition;
(m)Any other factor which the Commission may consider relevant for the inquiry.

 

Raghavan Committee Report on Competition Law observes as follows in paragraph
4.4-8:
“Therefore, to assess dominance it is important to consider the constraints that an enterprise faces on its ability of act independently. The current market share is a necessary but insufficient prerequisite for dominance. In spite of having a large market share a firm may be constrained by the threat of competition from potential entrants
and by the purchasing power of its own customers. Entry barriers could result from absolute advantages such as patents (legal) and access to certain inputs. These could also result from strategic first-mover advantages. High sunk cost could make markets incontestable. Exclusionary practices could increase strategic advantages of the first
mover. Lastly, factors other than existing or potential competition need to be considered. For example, strong purchasing power-if customers are powerful relative to the enterprise-can also constrain the behavior of the firm.”

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