Real estate players forcing consumers to compare ‘one rotten apple with another’ – CCI pushes for greater self-regulation

In a strongly worded order passed yesterday, the Competition Commission of India has found the conduct of real estate developers ‘exploitative’. The CCI has gone on to note that the standards of self-regulation in the real estate sector have “shown a decline”. Despite these findings, the CCI eventually did not penalise the real estate players cititng a lack of evidence..The CCI was hearing a case involving 20 of the biggest real estate players in the country, along with industry body CREDAI. The developers and CREDAI were being probed for entering into one-sided agreements with buyers, and allegedly colluding amongst themselves to arm-twist buyers..And inspite of the hard findings, the CCI went on to hold that,.“There appears to be no market pressure, which can prod the participants to improve their services.”.Instead, the CCI has advocated the establishment of a strong regulatory mechanism, combined with immediate legislative steps to safeguard the interest of buyers in this sector..The CCI said it is not taking any penal action as the complaints against them related to abuse of dominant position and for anti-competitive arrangements, for which there were not sufficient evidences..At the same time, the commission went on to say that it “deeply recommends” an investigation into the conduct of the parties involved, and that the players in the sector take appropriate voluntary measures to address the concerns. It added,.“The Commission is of the firm opinion that issues raised by the Informant are not only pertinent but need to be addressed by the policy makers and regulators through appropriate legislative tools in tandem with the self-regulatory role played by CREDAI”..Commenting on the order, Dhir & Dhir Partner Rahul Goel, who represented the Purvankara group, said,.“It is interesting to note that the CCI in its recent order, concerning real estate developers, has not specified whether the order has been passed under section 27 of the Competition Act, 2002 or any other applicable section.However, on the CCI’s website, the order is posted along with other section 27 orders (holding parties in violation of the Competition Act, 2002). Also, the language of the orders in many paras suggest that practices carried on by the real estate companies are anti-competitive/ unfair/ exploitative; although no evidence has been found that the same are in collusive/ under an agreement.”.He also said that,.“I will exercise caution to conclude that the order is not against the real estate companies. There is a greater need to examine whether this order will grant any right to consumers at large to file compensation applications before the Competition Appellate Tribunal (provided the CCI and COMPAT perceive it to be an order under section 27 of the Competition Act). The CCI could have cleared its intention of not (indirectly) labeling it a section 27 order by posting it under the category of ‘other orders’ as available on the CCI website.”.Advocate Arnav Narain, who also represented Purvankara Group, commented,.“Interestingly, the CCI has very reluctantly proceeded ahead with absolving all real estate companies even though it conceded that there is no evidence to substantiate a violation of Section 3(3)(a) and S. 3(3)(b) of the Competition Act, 2002. Recently, in the DLF vs Belaire the COMPAT had held that DLF is abusing its dominant position in the real estate market (decision pending before the Supreme Court), and being a dominant player, it cannot of all people, argue that its practices are industry practices since it is the trendsetter for such abusive practices.In such a backdrop, it seems only logical, that if a market leader has already been held to be abusing its dominant position, it is very rarely possible that the other players in the said relevant market would be colluding to enter into anti-competitive agreements, as they themselves are victims of an abuse of dominance. The CCI in the last paragraph of its Order has made it very clear that it is not to be understood that the arguments of the lawyers appearing before it have been accepted, but merely on account of insufficiency of evidence, the CCI has been constrained from penalizing the real estate player.”.Below is the list of builders with their legal counsels.