DLF BELAIRE OWNERS ASSOCIATION CASE

Niharika Choudhary

1120

VIII Semester

CONCERNED MARKET: Residential real estate market.

PARTIES
Informant: Belaire Owners Association, the association formed by the apartment allottees
of a Building Complex, Belaire.

Opponents:

1. DLF Limited, which was involved in developing residential colonies in Delhi,

Gurgaon etc.
2. Haryana Urban Development Authority (HUDA) is a statutory body under Haryana
Urban Development Authority Act, 1977. It primary function was to promote and
secure development of urban areas in a systematic and planned way with the power to
acquire sell and dispose of property.
3. The Department of Town & Country Planning, Haryana is the nodal department to
enable regulated urban development in the State of Haryana. The policies of the
department aim at encouraging a healthy competition amongst various private
developers and public sector entities for integrated planned urban development. The
department also renders advisory services to various Departments / Corporations /
Boards such as HUDA. The major function was prevention of unauthorized
constructions and regulation of planned urban development

ALLEGATION BY THE INFORMANT

It has been alleged that by abusing its dominant position, DLF Limited (OP-1) has imposed
arbitrary, unfair and unreasonable conditions on the apartment - allottees of the Housing
Complex the Belaire, being constructed by it. Information was filed under Section 19 (1) (a)
of the Competition Act, 20021.It has also been alleged that OP-2 and DTCP OP-3 have
approved and permitted OP-1 to act in illegal, unfair and irrational manner as they have
allotted land and given licenses, permissions and clearances to OP-1 when it is ex-facie clear
that OP-1 has violated the provisions of various Statutes including Haryana Apartment
Ownership Act, 1983, the Punjab Scheduled Roads and Controlled Areas (Restriction of
Unregulated Development) Act, 1963 and Haryana Development and Regulation of Urban
Areas Rules, 1976.

1. Change in the number of apartments, delay in project: As per the advertisement of

OP-1, each of the five multi-storied buildings was to consist of 19 floors and the total
number of apartments to be built therein was to be 368 and the construction was to be
completed within a period of 36 months. However, in place of 19 floors with 368
apartments, which was the basis of the apartment allottees booking their respective
apartments, now 29 floors have been constructed. Consequently, not only the areas
and facilities originally earmarked for the apartment allottees are substantially
compressed, but the project has also been abnormally delayed. The fall-out of the
delay is that the hundreds of apartment allottees have to bear huge financial losses, as
while on 15 one hand, their hard-earned money is blocked, on the other hand, they
have to wait indefinitely for occupation of their respective apartments.
2. Apartment Buyers Agreement: OP-1 had devised a standard form of printed
Apartment Buyers Agreement for booking the apartments and a person desirous of
booking the apartment was required to accept it in toto and give his assent to the
agreement by signing on the dotted lines, even when clauses of the agreement were
onerous and one-sided.
i. The informant has stated that agreement stipulates that OP-1 has the absolute
right to reject and refuse to execute any Apartment Buyers Agreement without
assigning any reason, cause or explanation to the intending allottee. Thus,
there is neither any scope of discussion, nor variation in the terms of the
agreement.
ii. The decision of OP-1 to announce the Scheme, execute the agreement and
carry out the construction without the approved Layout Plan has serious

1
19. (1) The Commission may inquire into any alleged contravention of the provisions contained in subsection
(1) of section 3 or sub-section (1) of section 4 either on its own motion or on (a) [receipt of any information,
in such manner and] accompanied by such fee as may be determined by regulations, from any person, consumer
or their association or trade association;
 irreparable fall-outs for which the entire liability in normal course would have
been on it, but the consequences have been shifted to the allottees.2
iii. Inserting the waiver clause in the agreement clause that no consent of the
apartment allottee is at all required, if any change or condition is imposed by
OP-3 while approving the Layout Plan.
iv. The informant has stated that the agreement does not contain the
proportionate liability clause to fasten commensurate penalty/damages on OP-
1 for breach in discharge of its obligations. Since the apartments are sold
without the approval of the Layout/Building Plan, clause 1.5 stipulates that
due to the change in Layout Building Plan, if any amount was to be returned to
the apartment allottee, OP-1 would not refund the said amount, but would
retain and adjust this amount in the last instalment payable by the apartment
allottee. Further, the apartment allottee would not be entitled to any interest on
the said amount either. Similarly, if there is a change in the super area at the
time of completion of building and issuance of occupation certificate, although
the total price shall be recalculated but the amount, if any is required to be
returned, the apartment allottee would not get the refund and rather OP-1
would retain this amount, with the right to adjust this refund amount against
the final instalment as well. The apartment allottee also in the process has to
forego the interest thereon.
v. While time has been made essence with respect to apartment allottees
obligations to pay the price and perform all other obligations under the
agreement, OP- 1 has conveniently relieved itself by not making time as
essence for completion in fulfilling its obligations, more particularly, handing
over the physical possession of the apartment to the apartment allottee.
vi. The informant has submitted that as per clause 9.1, in future the apartment
allottee shall be at the mercy of OP-1 who has reserved to itself the right not
only to alter/delete/modify building plan, floor plan, but even to the extent of
increasing the number of floors and /or number of apartments.
vii. While the common areas and facilities might stand largely compressed on
account of increased 20 number of floors, the said clause has absolutely

2
This was also in defiance of decision rendered in a case involving OP-1 by the National Consumer Disputes
Redressal Commission, New Delhi.
 debarred the apartment allottees from claiming any reduction in price
occasioned by reduction in the area.
viii. it is not at all bothered that its collection of money must be commensurate with
the stage-wise completion of the project.
ix. The informant has also submitted that another arbitrary and unconscionable
clause 11.3 stipulates that in the event of OP-1 failing to deliver the
possession, the apartment allottee shall give notice to OP-1 for terminating
the agreement. OP-1 thereafter has no obligation to refund the amount to the
apartment allottee, but would have right to sell the apartment and only
thereafter repay the amount. In the process, OP-1 is neither required to
account for the sale proceeds nor even has any obligation to pay interest to the
apartment allottee and the apartment allottee has to depend solely on the
mercy of OP-1. The quantum of compensation has been unilaterally fixed by
OP-1 at the rate of Rs. 5/- per sq. ft. (or even Rs. 10/- per sq. ft.) of the super
area which is mere pittance.
x. Non-availability of steel, cement and other building materials has also been
given the colour of force-majeure.
xi. Further, clauses 23 and 24 make serious encroachment on rights of the
apartment allottees as although both the land beneath the building and the
super areas of the building have been paid by the apartment allottees and for
all practical purposes these areas belong to the apartment allottees, yet OP-1
unilaterally has reserved to itself the right to mortgage/create lien and
thereby raise finance/loan. In an event of OP-1 DLF not able to repay or
liquidate the finance/ loan, the apartment allottee may be direct sufferer, a
clause which is not reconcilable to the provisions of Section 9 of the Haryana
Apartment Ownership Act, 19833 as well.

3
9. Encumbrances against apartments.

(1) Subsequent to the recording of the declaration as provided in this Act and while the property remains subject
to this Act, no encumbrance of any nature shall thereafter arise or be effective against the property. During such
period, encumbrances may arise or be created only against each apartment and the percentage of undivided
interest in the common areas and facilities appurtenant to such apartment, in the same manner and under the
same conditions in every respect as encumbrances may arise or be created upon or against any other separate
parcel of property subject to individual ownership:
Provided that, if during the period any encumbrance has arisen or been created against such apartment and the
percentage of undivided interest in the common areas and facilities appurtenant to such apartment, no apartment
and such percentage of undivided interest shall be partitioned or sub-divided in interest:
 xii. Unbalanced Compensation: It has further been submitted by the informant
that clause 35 brings to the fore the arbitrary mis-match between the buyer and
seller, whereby the apartment allottee has been foist with the liability to pay
exorbitant rate of interest in case the allottee fails to pay the instalment in due
time i.e. 15% for the first 90 days and 18% after 90 days. When this lop-sided
provision is compared to clause 11.4 the unfairness of the agreement is amply
demonstrated as OP-1 would 23 pay only Rs. 5/- sq. ft. to the allottee for per
month delay, i.e. 1% per annum.
xiii. The informant finally has also alleged that it is not clear how the various
Government Agencies, more particularly, OP-2 and OP-3 have approved and
permitted OP-1 to act in this illegal unfair and irrational manner. Various
Government and statutory authorities have allotted land and given licenses,
permissions and clearances to OP-1 when it is ex-facie clear that OP-1 has
violated the provisions of various Statutes including Haryana Apartment
Ownership Act, 1983, the Punjab Scheduled Roads and Controlled Areas
(Restriction of Unregulated Development) Act, 1963 and Haryana
Development and Regulation of Urban Areas Rules, 1976.

Provided further that no labour performed or materials furnished with the consent or at the request of an
apartment owner or his agent or his contractor or sub-contractor shall be the basis for a charge or any
encumbrance under the provisions of the Transfer of Property Act, 1882 against the apartment or any other
property of any other apartment owner not expressly consenting to or requesting the same, except that such
consent shall be deemed to be given by the owner of any apartment in the case of emergency repairs thereto,
labour performed and material furnished for the common areas and facilities, if duly authorized by the
association of apartment owners, the Manager or Board of Managing in accordance with the Act, the declaration
or bye-laws, shall be deemed to be performed or furnished with the consent of each apartment owner and shall
be the basis for a charge or encumbrance under the Act aforesaid against each of the apartment and shall be
subject to the provisions of sub-section (2).
(2) In the event of a charge or any encumbrance against two or more apartments becoming effective, the
apartment owners of the separate apartments may remove their apartments and the percentage of undivided
interest in the common areas and facilities appurtenant to such apartments from the charge or encumbrance by
payment of the proportional amounts attributable to each of the apartments affected. Such individual payment
shall be computed by reference to the percentage appearing in the declaration. Subsequent to any such payment
discharge or other satisfaction, the apartment and the percentage of undivided interest in the common areas and
facilities appurtenant thereto shall thereafter be free and clear of the charge or encumbrance so paid, satisfied or
discharged. Such partial payment, satisfaction or discharge shall not prevent the person having a charge or any
other encumbrance from proceeding to enforce his rights against any apartment and the percentage of undivided
interest in the common areas and facilities appurtenant thereto not so paid, satisfied or discharged.
REFERENCE TO DIRECTOR GENERAL
The Commission, after considering the available information formed an opinion that a prima-
facie case exists and directed under Section 26(1) vide order dated 20.05.2010 that
investigation be made in the matter by the office of Director General.

INTERIM ORDER UNDER SECTION 334

1. OP-1 was restrained from cancelling allotment of apartment allottees of Belaire
Residential Complex.
2. OP-1 was further restrained from creating third party rights by selling, alienating or
transferring in any manner whatsoever the apartments and the common areas and
facilities relatable to any cancellation of allotments so far, without leave of the
Commission.

ISSUES RAISED
1. Do the provisions of Competition Act, 2002 apply to the facts and circumstances of
the instant case?
2. What is the relevant market, in the context of section 4 read with section 2 (r), section
19 (5), section 19(6) and section 19(7) of the Competition Act, 2002?
3. Is DLF Ltd. dominant in the above relevant market, in the context of section 4 read
with section 19 (4) of the Competition Act?
4. In case DLF Ltd. is found to be dominant, is there any abuse of its dominant position
in the relevant market by the above party?

ISSUE 1: DO THE PROVISIONS OF COMPETITION ACT, 2002 APPLY TO THE FACTS AND

CIRCUMSTANCES OF THE INSTANT CASE?

It has been contended by the DLF that as sale of an apartment can neither be termed as sale
of goods nor sale of service, section 4(2)(a)(ii) is not relevant and applicable in the present
case because it can be invoked only when there is purchase or sale of either goods or service.5
It was also contended that none of the impugned conditions can be said to have been imposed

4
Section33: Where during an inquiry, the Commission is satisfied that an act in contravention of sub-section (1)
of section 3 or sub-section (1) of section 4 or section 6 has been committed and continues to be committed or
that such act is about to be committed, the Commission may, by order, temporarily restrain any party from
carrying on such act until the conclusion of such inquiry or until further orders, without giving notice to such
party, where it deems it necessary.]
5
Relied on the case Bangalore Development Authority vs. Syndicate Bank (2007) 6 SCC 711 in para 20
after 20.05.2009 when Section 4 came into force. It has been also urged that prior to
20.05.2009, there was no legally recognized concept of an enterprise having a dominant
position. Therefore, the dominance of an enterprise can be seen only on or after 20.05.2009 in
terms of section 4 of the Act and it is only thereafter the question of contravention of section
4 would arise, if any unfair or discriminatory condition is imposed. DLF has also taken a
stand that the alleged conditions which have been taken as abusive are in fact usual
conditions included in the agreements in accordance with industry practice and, therefore,
it cannot be said that such conditions are imposed by abuse of dominant position. Further,
since the impugned clauses of the agreement are adopted by other competitors also it became
necessary for the DLF to incorporate such clauses in order to meet competition and remain
competitive.

ANALYSIS BY CCI
I. INTERPRETATION OF SERVICE TO INCLUDE REAL ESTATE BUSINESS
1. Definition of Service under the MRTP Act: definition of service under section 2(r) of
the MRTP Act envisages dealings in real estate.6 The explanation added in section
2(r) of the MRTP Act which declared that any dealings in real estate shall be included
and shall be deemed always to have been included within the definition of service.
2. Definition of Service under the COPRA: In a catena of cases the Supreme Court has
time and again held that housing activities undertaken by development authorities are
service and are covered within the definition of service given in section 2(o) of the
Consumer Protection Act7. It has been further held that the purchaser of flats or
houses or plots are covered under the definition of consumer.8 a person who applies

6
In Bhim Sen vs. Delhi Development Authority, MANU/MR/0012/2003 while dealing with the allegation of
unfair trade practice on part of DDA, the MRTP Commission held that a misrepresentation or false
representation to the complainant that a flat would be allotted to him followed by failure to offer the allotment
was a failure on the part of DDA that was tantamount to deficiency in service.
7
Section 2(o) "service" means service of any description which is made available to potential users and
includes, but not limited to, the provision of facilities in connection with banking, financing insurance,
transport, processing, supply of electrical or other energy, board or lodging or both, housing construction,
entertainment, amusement or the purveying of news or other information, but does not include the rendering of
any service free of charge or under a contract of personal service
8
Lucknow Development Authority Vs. M.K.Gupta, MANU/SC/0178/1994
Construction of a house or flat is for the benefit of person for whom it is constructed. He may do it himself or
hire services of 161 a builder or a contractor. The latter being for consideration is service as defined in the Act.
Similarly when a statutory authority develops land or allots a site or constructs a house for the benefit of
common man it is as much service as by a builder or a contractor. The one is contractual service and other is
statutory service. If the service is defective or it is not what was represented then it would be unfair trade
practice as defined in the Act. Any defect in construction activity would be denial of comfort and service to a
consumer. When possession of property is not delivered within stipulated period the delay so caused is denial of
service. Such disputes or claims are not in respect of Immovable property as argued but deficiency in rendering
of service of particular standard, quality or grade
 for a allotment of a building site or for a flat constructed by a development authority
or enters into an agreement with a builder or a contractor is a potential user and
nature of transaction is covered under the definition of service of any description.
Housing activity is a service covered in the definition of term service.

HELD:
a. When considering the fact that the definitions of consumer given in section 2(f) and
service in section 2 (u)9 of the Competition Act, 2002 are wider than the definition
of these terms provided in the Consumer Protection Act, 1986. It is thus seen that
dealings in real estate or housing construction has always been taken as service
whether it be MRTP Act or Consumer Protection Act or Finance Act.
b. A plain reading of section 2(u) of the Act makes it abundantly clear that the activities
of DLF in context of the present matter squarely fall within the ambit of term
service.
II. ENFORCEABILITY OF SECTION 4 ON ABA AGREEMENT
In the present case the agreements, although entered between DLF and the
allottees before 20.05.2009 when section 4 of the Act came into being, remained
in operation even after the said date and DLF proceeded with the cancellation of
various allotments under the clauses of the agreement. Therefore, if the DLF acts
under the clauses of the agreement, which are now prohibited by the Act, such
action can certainly be examined under the relevant provisions of the Act.10 Act
applies to all the existing agreements and covers those also which though entered

9
Section 2(u): service means service of any description which is made available to potential users and
includes the provision of services in connection with business of any industrial or commercial matters such as
banking, communication, education, financing, insurance, chit funds, real estate, transport, storage, material
treatment, processing, supply of electrical or other energy, boarding, lodging, entertainment, amusement,
construction, repair, conveying of news or information and advertising;
10
Relied on Kingfisher Airline Ltd. & Anr. Vs. CCI & Ors
The question here is whether this agreement, which was valid until coming into force of the Act, would
continue to be so valid even after the operation of the law. The parties as on today certainly propose to act upon
that agreement. All acts done in pursuance of the agreement before the Act came into force would be valid and
cannot be questioned. But if the parties went to perform certain things in pursuance of the agreement, which are
now prohibited by law, would certainly be an illegality and such an agreement by its nature, therefore, would,
from that time, be opposed to the public policy. We would say that the Act could have been treated as operating
retrospectively, had the act rendered the agreement void ab initio and would render anything done pursuant to it
as invalid. The Act does not say so. It is because the parties still want to act upon the agreement even after
coming into force of the Act that difficulty arises. If the parties treat the agreement as still continuing and
subsisting even after coming into force of the Act, which prohibits an agreement of such nature, such an
agreement 166 cannot be said to be valid from the date of the coming into force of the Act. If the law cannot be
applied to the existing agreement, the very purpose of the implementation of the public policy would be
defeated. Any and every person may set up an agreement said to be entered into prior to the coming into force of
the Act and then claim immunity from the application of the Act, such thing would be absurd, illogical and
illegal. The moment the Act comes into force, it brings into its sweep all existing agreements.
 into prior to the coming into force of section 4 but sought to be acted upon now. In
addition to that, in the present matter, the documents filed by the informant show
that indeed in some cases the agreement was entered into between DLF and the
allottees after the date of commencement of section 4 of the Act.
III. PROVISIONS OF AGREEMENT IN LINE WITH THE INDUSTRY PRACTICE
In terms of the section 4 the responsibility of the dominant player has been made
more onerous and if such practices are also adopted by a non-dominant player it
may not fall within the ambit of section 4. On same ground the contention that
DLF has incorporated impugned conditions to meet the competition is also not
acceptable. It was observed that industry practices emanate from market leaders
and are followed by the rest. Such a market leader is not constrained to adopt
practices initiated by minor players. Under the facts and circumstances of the
case, if DLF Ltd. were to modify the format of its agreement and make it more
buyer friendly, it would be able to assert sufficient pressure on its competitors to
follow suit.

ISSUE 2: WHAT IS THE RELEVANT MARKET, IN THE CONTEXT OF SECTION 4 READ WITH

SECTION 2 (R), SECTION 19 (5), SECTION 19(6) AND SECTION 19(7) OF THE COMPETITION
ACT, 2002?
The informant, Belaire Owners Association obviously represents the consumers in this
market, while DLF Ltd. is selling or supplying some product or service. Haryana Urban
Development Authority (HUDA) is a statutory authority and Department of Town and
Country Planning (DTCP), State of Haryana is a government department, both of which
provide the regulatory or policy environment in the market under consideration. The next
point which was determined by the CCI was whether these services, provided by DLF Ltd. to
the informant, are of a distinct nature by reason of characteristics their prices and
intended use as stipulated in section 2(t) of the Act.11 The Commission also relies on factors
of determination given in section 19(7), such as end-use, price and consumer preferences12.

11
Section 2(t): relevant product market means a market comprising all those products or services which are
regarded as interchangeable or substitutable by the consumer, by reason of characteristics of the products or
services, their prices and intended use
12
Section 19(7) The Commission shall, while determining the relevant product market, have due regard to all
or any of the following factors, namely: (a) physical characteristics or end-use of goods; (b) price of goods or
service (c) consumer preferences; (d) exclusion of in-house production; (e) existence of specialised producers;
(f) classification of industrial products.
Thus, there are 2 important components of service definition made by the DG with regard to
characteristics of the underlying physical asset that require interpretation, viz. high-end
and residential. Geographical market being Gurgaon.

I. INTERPRETATION OF HIGH-END
Commission agreed that there can be no hard and fast criteria for determining
concepts like luxury or high-end but believe that just because no specific
distinguishing criteria exist, it does not mean that there is no distinction between
high-end and economy or low-end residential units. The most significant
characteristic of a high-end has to be the characteristics of its actual customers
and amongst all objective differentiators of a customers characteristics is his or
her capacity to pay because in economics, demand is desire backed by the ability
to pay. Users / buyers of high-end accommodation demand quality and
ambience of a distinctly higher level, and are willing to pay significantly higher
prices to meet their requirements. Taking into account the current prices of HIG
accommodation provided by these development authorities, as also the demands
and paying capacity of the growing upper middle and rich classes in the society,
from the cost perspective it is quite logical to accept an apartment costing Rs. 2
2.5 crores (20 25 million) as high-end in the Indian socio-economic reality.
Residential units that do not have similar attributes will not be substitutes because
the buyers are looking for luxury and not just a roof on their heads. That is why
they are willing to pay a high-end price. There is ample information in public
domain in terms of newspaper ads, websites of property dealers etc. that indicate
that features of properties such as DLFs Belaire is not a common feature for
residential properties in general. These features, along with the cost-range
mentioned earlier, may be broadly considered to define the characteristics of
high-end residential accommodation.
II. RELEVANT GEOGRAPHIC MARKET
In terms of section 2(s) of the Act, condition of competition for the services
provided by competitors should be distinctly homogeneous and can be
distinguished from the conditions prevailing in neighbouring areas. The
Commission also takes into consideration factors such as local specification
requirements and consumer preferences given as determining factors in section
19(6) of the Act. Based on the facts of the case, Gurgaon is seen to be the relevant
 geographic market. A decision to purchase a high-end apartment in Gurgaon is
not easily substitutable by a decision to purchase a similar apartment in any other
geographical location. Gurgaon is known to possess certain unique geographical
characteristics such as its proximity to Delhi, proximity to Airports and a distinct
brand image as a destination for upwardly mobile families. A small, 5 % increase
in the price of an apartment in Gurgaon would not make the person shift his
preference to Ghaziabad, Bahadurgarh or Faridabad on the peripheries of Delhi
or even to Delhi in a vast majority of cases.

ISSUE 3: IS DLF LTD. DOMINANT IN THE ABOVE RELEVANT MARKET, IN THE CONTEXT OF
SECTION 4 READ WITH SECTION 19 (4) OF THE COMPETITION ACT?

The Explanation (a) to section 4 very clearly defines dominant position as a position of
strength. This strength should enable the enterprise to operate independently of
competitive forces prevailing in the relevant market or to affect its competitors or
consumers or the relevant market in its favour. The evaluation of this strength is to be
done not merely on the basis of the market share of the enterprise in the relevant market but
on the basis of a host of stipulated factors such as size and importance of competitors,
economic power of the enterprise, entry barriers etc. as mentioned in Section 19 (4) of the
Act13. Following factors were considered:

i. operate independently of competitive forces prevailing in the relevant market;

ii. affect its competitors or consumers or the relevant market in its favour

The DLF Ltd. has firstly contended that there are many large real estate companies and
builders in India, particularly in Northern India as well as in NCR and Gurgaon who offer
stiff competition and give competitive offers in the relevant market of residential apartments
to give a wide choice to the consumers. OP-1 has argued that the market share determined by
13
Section 19(4) The Commission shall, while inquiring whether an enterprise enjoys a dominant position or not
under section 4, have due regard to all or any of the following factors, namely: (a) market share of the
enterprise; (b) size and resources of the enterprise; (c) size and importance of the competitors; (d) economic
power of the enterprise including commercial advantages over competitors; (e) vertical integration of the
enterprises or sale or service network of such enterprises; (f) dependence of consumers on the enterprise; (g)
monopoly or dominant position whether acquired as a result of any statute or by virtue of being a Government
company or a public sector undertaking or otherwise; (h) entry barriers including barriers such as regulatory
barriers, financial risk, high capital cost of entry, marketing entry barriers, technical entry barriers, economies of
scale, high cost of substitutable goods or service for consumers; (i) countervailing buying power; (j) market
structure and size of market; (k) social obligations and social costs; (I) relative advantage,by way of the
contribution to the economic development, by the enterprise enjoying a dominant position having or likely to
have an appreciable adverse effect on competition; (m) any other factor which the Commission may consider
relevant for the inquiry.
JLLM report based upon number of apartments as well as on the basis of the values thereof
offered by the respective developers in NCR and Gurgaon is the correct basis for determining
market share. OP-1 has also stated that sales figure of different developers is not available
and also might not be relevant for determining the market share. Moreover, determination of
market share for Gurgaon derived from market shares based on the all India sales figure is not
appropriate. As regards factors other than the market share mentioned in 19(4) of the
Competition Act, 2002, OP-1 has also contended they need not be discussed since the
assumption that the market share of DLF is the highest itself has no basis and thereafter
consideration of the further factors becomes irrelevant. With specific reference to clauses (b)
& (c) of Section 19(4), it was argued that its total size and turnover considered by the DG is
based on figures that relates to commercial as well as retail business, which is admittedly
larger. Moreover, the figures are not confined only to the aforesaid relevant market.

HELD:
a. The biggest weakness of the data used by DLF is that it is based on current turnover
and active stock. Active stock signifies current trading stock and reveals nothing
about volumes already sold in recent past. There is nothing to indicate why DLF
should be given more weightage over the objective and unbiased data used by DG.
DLF Ltd. primarily relies on JLLM report that it commissioned while DG relies on
CMIE data (and others) that are objective and taken from public domain.
b. Further, if sufficient and undisputed data is not available to determine market share in
a credible manner, it becomes even more important to draw on other corroborating
data and analyse the other factors in even greater depth to off-set the difficulties in
working out sharply specified market shares on account of data constraints, and / or to
complement the market share when margins between competitors are not wide
enough in determining the strength of the enterprise in terms of affecting market
forces as set out in the explanation (a) to Sec 4. Within the above constraint, market
share can be used as the initial starting point for establishing dominance of an
enterprise. Two commonly used measures for defining market share in the real estate
business are a) sales figures (value terms) and b) active stock (volume terms),
although, both are sensitive to the quality of data. Data available in the public domain
pertaining to this sector is constrained by limited coverage both in space and time
dimensions. DG has used sales figures for measuring dominance while OP-1 prefers
to rely on active stock.
 c. the market share of OP-1 189 among the companies operating in Gurgaon exceeds
55%. DG has analysed total sales figure of 82 companies from CMIE database, who
are engaged in real estate residential business and who are not only operating in
Gurgaon but also in other places in India. On basis of this analysis, the DG report
establishes the superior market share of OP-1 at about 44%. For the year 2009-10
also, DG has shown the market share of OP-1 in relevant market to be about 50%. It
was observed that the market share of OP-1 is more than double of the market share
of Unitech, its nearest competitor, as on date. In totality, it can be said that market
share of OP-1 as determined by DG on basis of very detailed analysis is indicative of
its dominance in the relevant market.
d. It is important to note that to evaluate the relative position of strength in terms of the
parameters of size and resources of the enterprise and size and importance of the
competitors given under section 19 (4) (b) and (c) of the Act, it is not necessary to
confine the evaluation only to the relevant market. Indeed, to do that would defeat the
very purpose of these parameters. It is the overall size and resources of an enterprise
or the overall importance of a competitor that has to be compared to see comparative
position of strength and not the limited manifestation of that strength in a particular
product or geographic market.
e. The investigation report states that DLF Ltd. has a clear early movers advantage
since it has been in the business since 1946 and apart from residential sector; it has
leadership position in commercial, retail and office space sectors. This position has
been propagated by DLF itself and is evident from the wordings of the draft Red
Hearing prospectus filed before SEBI and public statements of its Executive
Chairman that, DLFs dominant position in Indian Homes segment is established...
This level of vertical integration of sale or service network has not been achieved by
other competitors particularly in Gurgaon.
f. A consumer looking for residential accommodation is influenced by several factors
such as proximity of work place, schools, recreation centres, shopping centres etc.
Due to the high level of vertical integration of services in the integrated township of
DLF in Gurgaon, there is very high dependence of consumers on DLF in that area.

The argument advanced by OP-1 that other factors of dominance given in section 19 (4) are
only indicative is contrary to the legal position as seen from the provisions of the Act. Section
19 (4) says in no ambiguous terms that The Commission shall, while inquiring whether an
enterprise enjoys a dominant position or not under section 4, have due regard to all or any of
the following factors ... Thus, it is clear that the Act does not envisage that market share
alone should be considered by the Commission while determining dominant position of the
enterprise.

g. On the contrary, it can be seen that though over the past few years several new
developers / builders have entered the relevant market, despite this development there
has been little dilution of the position of strength of DLF Ltd. in the market. The fact
that there has been no move to improve the framework of buyers agreement to make
it more attractive to consumers, also supports this conclusion. Under a more
competitive scenario, where there are increased numbers of players capable of
supplying equally good rival products or services, the incumbent player would display
a strong tendency to meet the competition and this would be reflected in improved
customer interface, amongst other things. There is no evidence to show this has
happened.
h. Similarly, by offering a few value added services, DLF would be able to exert a
multiplier effect on non-price competition, which would sway the consumers in its
favour. A live example of such market power is the project of Belaire itself where
bookings were made despite the awareness that all necessary clearances were not in
place. Due to the real and perceived position of strength that DLF Ltd. enjoys in the
eyes of the consumers, it was able to attract buyers despite the uncertainty regarding
the project.
i. A market leader, by definition, enjoys a unique position in the market. A unique
interplay of, and casual relationships between, the various factors which give the firm
a leadership position also give it the ability to act independently of its competitor. It
has the ability to influence many of the factors which determine the market and its
characteristics themselves. It can often lay down the rules of the game, which power /
strength it could naturally tend to exercise in its favour to the potential detriment of
the competitors and consumers interests. A market leader would, therefore, normally
have dominance in the market, and could be considered on this basis itself, to be a
dominant firm in the relevant market in terms of provisions of Section 4 of the Act.
The Commission is of the view that DLF enjoys the position of market leader in the
real estate sector in general, and in the relevant market in particular, and this is a
 relevant factor under Section 19 (4) (m) for holding that it has a dominant position in
the relevant market.

ISSUE 4: IN CASE DLF LTD. IS FOUND TO BE DOMINANT, IS THERE ANY ABUSE OF ITS

DOMINANT POSITION IN THE RELEVANT MARKET BY THE ABOVE PARTY?

Following were the key concerns in the ABA

Unilateral changes in agreement and supersession of terms by DLF without any right
to the allottees
DLFs right to change the layout plan without consent of allottees
Discretion of DLF to change inter se areas for different uses like residential,
commercial etc. without even informing allottees
Preferential location charges paid up-front, but when the allottee does not get the
location, he only gets the refund/adjustment of amount at the time of last instalment,
that too without any interest
DLF enjoys unilateral right to increase / decrease super area at its sole discretion
without consulting allottees who nevertheless are bound to pay additional amount or
accept reduction in area
Proportion of land on which apartment is situated on which allottees would have
ownership rights shall be decided by DLF at its sole discretion (evidently with no
commitment to follow the established principles in this regard).
DLF continues to enjoy full rights on the community buildings / sites / recreational
and sporting activities including maintenance, with the allottees having no rights in
this regard
DLF has sole discretion to link one project to other projects, with consequent impact
on ambience and quality of living, with the allottees having no right to object
Allottees liable to pay external development charges, without there being disclosed in
advance and even if these are enhanced
Total discretion of DLF regarding arrangement for power supply and rates levied for
the same:
Arbitrary forfeiture of amounts paid by the allottees in many situations
DLF has sole authority to make additions / alterations in the buildings, with all the
benefits flowing to DLF, with the allottees having no say in this regard
 Third party rights created without allottees consent, to the detriment of allottees
interests:
Punitive penalty for default by allottees, insignificant penalty for DLFs default

HELD:
a. Thus, the allottees become captured consumers who are subject to abuse by DLF
through imposition of unfair conditions contained in the Agreement. Such abuse is not
a one-time abuse by DLF, rather it continues throughout the span of the period of
construction, and allottees are subjected, or there is a scope to subject them time and
again, to newer conditions aggravating the existing abusive conduct of DLF
b. DLF Ltd. challenged the above conclusions of abusive conduct cited by the DG in its
submissions before the Commission. Apart from arguments in respect of the above
conduct, DLF Ltd. also contended that they had voluntarily given a large number of
benefits to the allottees. In this regard, the view of the Commission is that one unfair
condition cannot be counter balanced and wiped out by another seemingly fair or
propitiating act.
c. These are some of the clauses that show how heavily loaded the buyers agreement is
in favour of DLF Ltd. and against the buyer. Under normal market scenario, a seller
would be wary of including such one-sided and biased clauses in its agreements with
consumers. The impunity with which these clauses have been imposed, the brutal
disregard to consumer right that has been displayed in its action of cancelling
allotments and forfeiting deposits and the deliberate strategy of obfuscating the terms
and keeping buyers in the dark about the eventual shape, size, location etc. of the
apartment cannot be termed as fair. The course the progress of the project has taken
again indicate that DLF Ltd. beguiled and entrapped buyers through false solicitations
and promises.
d. The point under contention is not whether such one sided clauses favouring DLF Ltd.
and putting the allottees in a position of distinct disadvantage were part of an
agreement and hence contractual obligation, as argued by the OP-1. The moot
point in this case and indeed the competition concern is that a dominant builder /
developer is in a position to impose such blatantly unfair conditions in its
agreement with its customers and bind them in such one-sided contractual
obligation. In a competitive scenario, where the enterprise indulges in such anti-
consumer conduct, there is sufficient competition in the market to provide easy
 alternatives for the consumer. The competitive forces would ensure that the builder /
developer would soon face loss of customers, which would force it to become more
consumer-friendly. However, only when a dominant enterprise indulges in such
conduct is there little hope for the consumers because not only that enterprise
indulges in such behaviour with impunity but smaller competitors would want to
enjoy as much advantage by following the leader. Since a weaker competitor is not in
a position to take on the competitive might of the dominant enterprise, it would rather
emulate the dominant enterprise and take similar advantage of the consumers.

COMPAT DECISION

COMPAT has, inter alia, made the following observations:

Issue I: Jurisdiction of the CCI

The CCI was right in assuming the jurisdiction on the basis of the definition of the term
service in Section 2 (u). The term service as contemplated in Section 4 has a direct
relation to Section 2 (u), which provides for the service of the nature which is being
provided by DLF i.e. real estate & construction.

Issue II: Retrospective Operation of the Act & Applicability of Kingfisher Judgment

Retrospective Operation of the Act: Section 4 is not retrospective in operation. Section 4 (2)
(a) will only attract if there is an imposition of unfair or discriminatory condition or price. In
2006-07, when the Section 4 was not in force, the allottees entered into ABA voluntary
without any element of coercion and hence, there was no imposition of any condition in the
ABA by DLF.

Applicability of the Kingfisher Judgment: COMPAT rejected CCIs approach in examining

the clauses of ABA and observed that all acts done in pursuance of the agreement before the
Act came into force would be valid and cannot be questioned. But if the parties want
to perform certain acts in pursuance of the agreement, which are now prohibited by the Act,
then those acts would be illegal. No provision in the Act permits the re-writing of the
agreements. If DLF acted in pursuance of ABA, which was contrary to the Act, then CCI
could have taken an exception to those acts, but not to the clauses of ABA, which were
valid. Also, the continuation of the agreement after May 20, 2009 by itself would not attract
the mischief of the Act, unless there was some act in pursuance of those clauses, which were
not contemplated in the agreement and would, therefore, amount to an imposition of
condition.

Moreover, the CCI cannot direct modification of the ABA. The power to modify agreements
lies under Section 27(d). Only the agreement under Section 3 (anti-competitive agreements)
can be ordered to be modified under Section 27(d), since, Section 27 speaks about action
when it speaks about contravention of Section 4.

Issue III: Relevant Market and Dominant Position of DLF

Relevant Market: The CCI market definition was correct i.e. services of developer / builder
in respect of high-end residential accommodation in Gurgaon. On the issue of Geographic
Market, it was observed that, the residential housing is not connected with investment.
Ordinarily, for a common man, basic need is food, other amenities of life and a property to
reside, as that creates a sense of security in his mind. If that is so, it will be futile to examine
the question only from the angle of investors.

Dominance: The CCIs reliance on the CMIE (Centre for Monitoring Indian Economy
Private Limited) data over other data/ reports available while assessing market share (55%) of
DLF was correct. DLFs market share was more than double of its next biggest competitor,
Unitech. DLF is a market leader and enjoy a unique position as it lay down the rules of the
game, which power/strength it exercises in its favor to the potential detriment of its
competitors and consumers' interests.

Issue IV: Abuse of Dominant Position by DLF

COMPAT did not consider any ABAs executed after May 20, 2009 and restricted the inquiry
only to the ABAs executed in 2006-2007 against which the information was filed with the
CCI. COMPAT only focused on the actions taken by DLF pursuant to ABA, post May 20,
2009.
ABA authorizes DLF to increase the number of floors by constructing additional floors, but
this imposition of additional construction without intimation & consent from allottees and
without prior approval from the Government Authority amounts to abuse of dominant
position by DLF.

The DLF offer to the original allottees regarding moving to a higher floor is discriminatory
vis--vis other allottees. It is against Article 14 of the Constitution of India and Section 4(2)
(a) (i) of the Act.

Unilateral increase in the super area and holding charges by DLF was in breach of the ABA
and amounted to abuse as DLF was well aware that allottees had no other choice, but to
accept the same. The only option left with the allottees was to exit the scheme, which was
unimaginably costly.

Issue V: Quantum of Penalty and Role of Government Departments

CCI has given sufficient reasons for imposing the penalty of INR 630 crores on DLF.
Further, COMPAT severely criticized DTCP (Town & Country Planning
Department, Haryana) for remaining blissfully ignorant about the illegal conduct and for not
taking any action against DLF.

Analysis

The COMPAT Order sends a strong signal to both the real estate industry and the state-level
government authorities, and may even expedite the process of establishing a real-estate
regulator by the new government.

The COMPAT Order assumes significance because, firstly, it is one of the initial cases of the
CCI and COMPAT which dealt with exploitative nature of abuse (exploiting customers) as
the jurisprudence on abuse of dominant position mainly centered on the exclusionary abuses
like price predation or refusal to deal etc., resulting in the exclusion of a competitor from the
market. Secondly, the COMPAT recognizes the principle of special responsibility of a
dominant enterprise. This principle had been laid down by European Court of Justice
in the Michelin Case in 1983. It means that a firm in a dominant position has a special
responsibility not to allow its conduct to impair undistorted competition on the
market. Thirdly, COMPAT confirmed the approach of the CCI on penalty, unlike the cases in
the past where COMPAT has substantially reduced the penalty imposed by the CCI