CCI introduces Leniency “Plus” regime in India- Will it suffice?
CCI fails to appreciate a new market concept; exonerates Sana Realtors of abuse of dominance in real estate market
The Competition Commission of India (“CCI/Commission”) vide its order dated 23.04.2019 exonerated M/s Sana Realtors Private Limited (“Sana Realtors”) against allegations of abuse of dominant position in the real estate market.
Background- SOHO market?
It was alleged that Sana Realtors under the name and umbrella of ‘Gambhir Housing India’ had launched a project called ‘Precision SOHO towers’ at Sector 67, Gurugram- Haryana in the year 2009 with its unique concept named SOHO (“Small Office Home Office”) which was widely advertised through its brochure, Website, Advertisement Videos on social media etc. This unique concept offered a workspace and home space in one unit. Attracted by this unique concept, the ten informants booked units during the period 2009-10 for which they executed agreements with the authorized signatory of Sana Realtors. As per the agreement, the delivery of possession of the units were to be completed by 2013, which they failed to, and the informants were aggrieved by the sly manner in which Sana Realtors acted by selling the units even before the building plan was approved. The informants also alleged that Sana Realtors had abused its dominant position in this unique market of “small office home office” by:
- Imposing unfair and discriminatory conditions (as many as 31 clauses) in the flat buyer’s agreement by giving itself arbitrary and discretionary powers.
- Imposing unfair exorbitant charges on the allottees for usage of the unit as well as carrying many hidden charges.
- Denying undivided equal rights to the allottees with respect to the project
- Imposing exorbitant penalties and forfeiture of earnest money on the allottees for non-compliance of the terms and conditions of the flat buyer’s agreement, with no such commensurate provision for payment of penalty to allottees in case of no compliance by the developer.
CCI Analysis-Not a Unique Market?
CCI acknowledging that the primary grievance of the informants was the delay in delivery of possession of the units went on to delineate the relevant market for analysis, in prejudice of the relevant market proposed by the Informants. The informants, keeping in mind the unique concept to which they were attracted in the first place, proposed the relevant market as provision of the services of developing and selling new and unique project I.e. “Small Office Home Office” offering the facility of both office cum home in one unit. However, it appears that this unique concept was not appreciated by the Commission, which decided to delineate the relevant market as the wide “market for commercial units for office space”. The Commission noted that Sana Realtors had advertised the model of Small Office Home Office as “small and affordable office space to ensure beauty and comfort catering to the needs of the corporate, small and medium enterprises” and therefore the Commission was of the view that the primary use of the space relates to office use only. According to the Commission, the only distinguishing factor I.e. unit for a bedroom (which allows the comfort of a home office) can be added by the consumer on his own in any office space he/she prefers as it is up to the discretion of the consumer to style his office space in the way he desires. In my view, the Commission wrongly disqualified this additional feature to not make it a new and distinct market ignoring the way in which the product was sold and solely focusing on how a consumer can deal with his office space.
Once the Commission decided to adopt the wider market for commercial units for office space, the case was over for the informants due to the presence of established and bigger organized players such as DLF Limited, Omaxe etc. Expectedly, the Commission concluded that Sana Realtors were not dominant in the market for commercial units for office space and there cannot be any abuse, in the absence of dominance.
Comment:
This order is on predictable lines . But in my view CCI has not appreciated that the SOHO was a new concept for which Sana Realtors were trying to create demand and they were partly successful at that given the wide response it received. CCI should have examined this newly created “relevant product market” in Gurugram and if the developer was found to have abused its dominance in the newly created market by itself, CCI ought to have stopped it by issuing appropriate directions in sync with its now famous DLF order, though under challenge in Supreme Court .
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