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India – CCI Rules Out Abuse Of Market Dominance By Four Realty Firms.

22 October, 2013

 

 

In a span of two days, CCI issued four separate orders dismissing allegations of abuse of dominance against four real estate firms. In its decision of September 2, 2013, CCI examined allegations against Sanathnagar Enterprises (‘SE’), an associate company of real estate major Lodha Group. The owners welfare association had alleged that the ‘Agreement for Sale’ executed by SE was highly in favour of the seller and contained incorrect facts. While CCI agreed with the association’s definition of the relevant market as the ‘market for provision of services towards development of residential apartments in Hyderabad’, it held that SE was not in a dominant position in the relevant market. CCI’s decision was premised on three considerations – a report which stated that SE had only one project in Hyderabad, thereby reflecting its “miniscule market share”, that statements made by SE in its red-herring prospectus in relation to its market position could not constitute valid evidence of market power per se and the presence of other well known builders which negated allegations of consumer dependence on SE for the purchase of residential flats in Hyderabad.


In two orders issued on September 3, 2013 against real estate developers Media Video Limited (‘Media Video’) and Designarch Infrastructure Pvt. Limited (‘Designarch’), CCI held that neither of the two were dominant in their respective relevant markets. In the first case, a buyer alleged that Media Video was abusing its dominant position by not giving possession of the newly constructed apartment nor permitting transfer of the flat to a third party. However, on account of the fact that there were numerous near-complete residential apartments of similar specifications in the same geographic areas as Media Video, CCI held that Media Video could not be considered dominant. Consequently, allegations of abuse of dominance could also not be sustained.


In the complaint filed against Designarch, it was alleged that the realtor was the only developer in the business of developing designer electronic/eco-friendly homes in Vaishali and Greater Noida, and was therefore in a dominant position. Designarch had allegedly failed to make vital disclosures in relation to land area, being a requirement under local land law, and had imposed arbitrary cancellation terms in the allotment, leaving the complainant without an exit option. Disagreeing with the complainant’s definition of relevant product market, CCI held that the “the provision for services of e-home” could not constitute a distinct product market as the facilities provided by Designarch could be installed in any flat without much structural modification. On this basis, and considering the number of existing developers of residential flats in NCR, CCI held that Designarch would not qualify as a ‘dominant’ enterprise in the appropriate relevant market for the provision of services of ‘development and sale/purchase of residential units’ in Delhi NCR.


Similarly, Pune-based real estate developer City Corporation Ltd. (‘City Corp.’) was accused of imposing a one-sided lease agreement on the complainant, and failed to address objections against the anti-competitive clauses incorporated in it. CCI determined the relevant market as ‘the provision of services for development and sale of residential flats in Pune’ and observed the presence of several up-coming residential flats in Pune. It further observed the presence of other comparatively bigger real estate developers in Pune, and on this basis, held that City Corp. cannot be said to be operating independently of market forces, and did not, therefore, qualify as dominant enterprise.

 

AZB

 

For further information, please contact:

 

Zia Mody, AZB & Partners
zia.mody@azbpartners.com

 

Abhijit Joshi, AZB & Partners 
abhijit.joshi@azbpartners.com


Shuva Mandal, AZB & Partners 
shuva.mandal@azbpartners.com

 

Samir Gandhi, AZB & Partners
samir.gandhi@azbpartners.com


Percy Billimoria, AZB & Partners 
percy.billimoria@azbpartners.com

 

Aditya Bhat, AZB & Partners 
aditya.bhat@azbpartners.com

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