CCI introduces Leniency “Plus” regime in India- Will it suffice?
CCI introduces the concept of relevant period in market definition-DLF no longer found to be in dominant position in Gurgaon
The Competition Commission of India vide two separate orders dated 31.08.2018 in Case no. 73/2014 and Case no. 84/2014 issued under Section 26(6) of the Competition Act,2002, has dismissed the allegations of abuse of dominance against the DLF group (DLF Limited and DLF New Gurgaon Home Developers Pvt. Limited) by holding that the enterprises were not in a position of dominance in the ‘relevant period’ in Gurgaon.
Both the cases emanated from information filed by two individual allotees of apartments in the townships i.e. Regal Gardens and Skycourt which were launched by the DLF group in 2011-2013. In both the cases, the main allegation was that DLF group had abused its dominant position by imposing extremely harsh and one-sided terms and conditions in the sale agreement. It was the contention of the Informants that certain clauses in the agreement are highly unfair and discriminatory towards the allottees and heavily biased towards the DLF group. Upon consideration, the Commission was of the view that prima facie the conduct of the DLF group was abusive and in contravention of Section 4 and directed the DG for investigation.
Investigation by the DG:
In the DG report submitted on 21.03.2016, the DG defined the relevant market as the “provisions for services for development/sale of residential units (apartments/flats/independent floors/villas) under the licensed category of residential group housing (RGH) and residential plotted land (RPL) in Gurgaon.”. Presumably, the DG found DLF group to be in a dominant position in the relevant market so defined and found it to have violated Section 4(2)(a) of the Act on account of the unfair and one-sided terms and conditions in the sale agreement.
However, upon consideration of the said Investigation report, the Commission did not agree with DG’s market definition and defined the relevant market as “provisions of services for development and sale of residential apartments/flats in Gurgaon” stating that the DG had not confined itself to the category of property which was the subject matter of the case i.e. apartments/flats and instead included the residential units developed under RGH and RPL licenses in the same category even though they comprised of different types of properties i.e. apartments/flats, plots and villas. Accordingly, the Commission directed DG to re-investigate the matter in the light of the revised relevant market as defined by the Commission and find whether DLF group was in a dominant position or not and if so whether it had abused its dominant position?
Accordingly, the DG vide supplemental investigation report dated 11.08.2017 examined the market power of the DLF group during the period 2011-12 to 2014-2015 and upon consideration into factors such as the market share of the DLF group and other developers in the revised relevant market, size and resources of the enterprise, economic power of the enterprise including commercial advantage over other competitors, dependence of consumers etc. observed that the extent to which DLG group could operate independently of the competitive forces or affect its competitors or consumers in the ‘relevant period’ was insignificant. It was, therefore, concluded by the DG that although DLF group occupied top positions when weighed against some factors, it could not be inferred that it had the market power/dominance in the relevant market during the ‘relevant period’. Hence, the DG concluded that DLF group was no longer in a dominant position
CCI analysis:
The Commission, agreeing with the findings of the DG, observed that the ‘relevant period’ for determination in the case “Regal Garden” township was the year 2011-12 and for “Skycourt” it was 2012-13.
Regal Garden (Case No. 73 of 2014)
It was observed by the Commission that residential licenses were granted to 96 developers during the period 2007-08 to 2011-12 for a cumulative total land of 5,549.38 acres out of which the DLF group had a share of 8.30% and occupied 3rd position with respect to its competitors such as Emmar MGF,“Vatika”, “Ireo” and “Unitech” with a share of 8.84%, 8.56%, 7.68% and 7.30% respectively.
Further, it was noted by the Commission that if the market share is considered for the years 2011-12 and 2012-13 (the years when the Informant decided to purchase the apartment), DLF group was at 2nd and 4th position in these years with a market share of 10.67% and 7.69% respectively. From this data, it was inferred by the Commission that there were several developers who had launched their projects at the same time the Informant purchased the residential apartment and the DLF group did not hold a dominant position in such a fragmented market where 90% of the residential apartments/flats were launched by other developers, out of which approximately 50% by the top ten developers.
Skycourt (Case no. 84 of 2014)
It was observed by the Commission that residential licenses were granted to 110 developers during the period 2007-08 to 2012-13 for a cumulative total land of 6,246.28 acres out of which the DLF group occupied 1st position with respect to its competitors such as “Ireo”, “Vatika”, and “Ramprastha” etc. Further, it was noted by the Commission that if the market shares are considered for the years 2012-13 and 2013-14(the years when the Informant decided to purchase the apartment), DLF group was at the 4th and 3rd position with a market share of 7.69% and 7.74% respectively. From this data, it was inferred by the Commission that there were several developers who had launched their projects at the same time the Informant purchased the residential apartment and the DLF group did not hold a dominant position in such a fragmented market where 90% of the residential apartments/flats were launched by other developers, out of which approximately 50% by the top ten developers.
As regards the dependence of consumers and entry barriers, it was observed that there were several established real estate players which were operating in the same as field providing choices to the consumer intending to purchase residential apartment/flat. And it did not appear that the consumers were dependent on the DLF group, given the options available in the relevant market at the time the Informant decided to purchase the residential apartment/flat. Further, the presence and rapid growth of the innumerable players in the market refuted the issue of entry barriers.
Finally, it was concluded by the Commission that the DLF group was not in a dominant position in terms of the relevant market during the relevant period and in absence of dominance there can be no case of abuse of dominance.
It is pertinent to note here that the Commission took note of the fact that the DLF group was found to be in a dominant position vide order dated 12.08.2011 in Case No. 19 of 2010 (Belaire Owner’s Association V DLF limited) and other subsequent cases. However, the Commission emphasized that the cases at hand presently are distinct from the previous cases, of which the primary distinguishing factor is the “assessment year”. The Commission highlighted that the markets by their very nature are dynamic and keep changing with time and while analysing dominance, an important factor that needs to be taken in consideration is the “time-period during which the contravention is alleged”.
Comment: This case is unique because it is the first time the Commission has introduced the concept of “relevant period” while determining the market position of an enterprise which was earlier held to be dominant in the same relevant market. The Commission categorically laid down that the markets are by nature dynamic and the most vital factor in determining any abuse of dominance is the time-period during which the alleged contravention has taken place i.e. whether the enterprise was still in a dominant position when the alleged contravention took place?
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