Why the real estate sector appears vulnerable to anti-trust allegations

However, it is difficult to get an order from the CCI on realty developers abusing their dominant position in the market because several proofs are required, experts say


Many realtors face complaints of competition law violation, which the CCI then probes or dismisses, depending on whether it sees merit in the case. Photo: Ramesh Pathania/ Mint
Many realtors face complaints of competition law violation, which the CCI then probes or dismisses, depending on whether it sees merit in the case. Photo: Ramesh Pathania/ Mint

New Delhi: Why does the real estate sector get so many cases of allegations of violating anti-trust principles?

The Competition Commission of India (CCI) has dismissed another allegation of abuse of dominant position by realtor Supertech, the Press Trust of India reported on Tuesday.

Many realtors face complaints of competition law violation, which the CCI then probes or dismisses, depending on whether it sees merit in the case.

A simple Google search for Supertech and CCI will throw up cases dating back to 2012, albeit dismissed for not falling foul of the law, but these cases keep getting filed nevertheless.

One reason could be the massive penalty imposed by the CCI on DLF Ltd a few years ago. The CCI, in a 2011 order, directed DLF to pay Rs630 crore for abusing its dominant position in the Gurgaon market. This case is still pending in the Supreme Court.

“Consumers feel that they will get a similar order in the DLF case. This case makes a lot of headlines,” said Arjun Krishnan, a lawyer who works on competition matters in the Supreme Court. “What consumers often don’t realize is that the penalty doesn’t go to them. It’ll go to a fund created for consumer welfare or to the consolidated fund of India.”

After the DLF case, there haven’t been many adverse orders against realtors.

According to a consumer welfare blog, The Logical Buyer, approaching the CCI is not the best option to get a favourable order (http://bit.ly/2e4iX4m).

This could be because of the high threshold of proof required. In order to prove a violation of abuse of dominant position in a market, proofs need to be furnished, according to Krishnan. What the relevant market will be, whether the company has a dominant position in that market and if it is abusing its dominance are three issues that have to be established.

“It is very difficult to get an order from the CCI on real estate developers abusing their dominant position, because a single company does not have the capability to influence the market,” said Ramesh Vaidyanathan, managing partner at Mumbai-based law firm Advaya Legal. “Can you say that Hiranandani is dominant in Powai (Mumbai)? Competition law expects a higher level of domination in a market,” he added.

The lack of a regulator in the real estate sector also often pushed buyers to approach the CCI. The passing of the Real Estate Regulatory Act has also brought some accountability on the part of developers to deliver homes on time to buyers and brought in transparency in the system.

However, the competition aspect is separate and may still be looked at by the CCI, Krishnan said.

“One of the aims and objectives of the CCI is also to protect the rights of the consumers. Consumers don’t necessarily have to approach the CCI, it has powers to order investigation on its own accord as well,” he added.

On being asked if the real estate sector was particularly vulnerable to anti-trust issues, Vaidyanathan replied in the negative.

“Unlike many other sectors, there is no single dominant player. It is not surprising that these complaints are being thrown out,” he added, referring to the development in the case of Supertech.

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