DLF V CCI Case Summary Updated

DLF (Delhi Land & Finance) v.
Competition Commission of India
Facts
DLF had announced the launch of housing complexes known as The Belaire, Park Place, and
Magnolia, upon which buyers booked the apartments and entered into an Apartment Buyers
Agreement (ABA).
After buyers had already paid a substantial amount, DLF modified their original schemes,
increasing the number of floors to be constructed in each individual building of the three projects.
This led to an overall increase of about 53% in the number of apartments among the three
projects that DLF was making.
On the grounds of construction delays and substantial compression of the common areas and
facilities originally earmarked for each apartment, a complaint was filed by the buyers against
DLF.
The case was investigated by the CCI, resulting in a penalty of ₹630 crores on DLF, against
which DLF filed an appeal in the Competition Appellate Tribunal.
Issues
Whether DLF abused its dominant position in the relevant market.
Whether the agreement and clauses in question violated Section 4 of the Competition Act.
Arguments by DLF
DLF appealed the CCI judgment to the Competition Appellate Tribunal on several grounds,
including that the ABA is not a sale of 'goods' or 'services' and is therefore exempt from the Act.
Since all ABAs were signed between 2006 and 2007, and Section 4 of the Act came into effect on
May 20, 2009, the Act does not apply retroactively to these ABAs.
Furthermore, DLF argued that the relevant market was determined incorrectly, that DLF is not a
dominant player in the market, and that there was no misuse of DLF's alleged dominance.
Argument by CCI
CCI argued that since apartment sales are considered 'services,' the Act is applicable.
Since the ABA was put into effect after the 'abuse of dominance' provision took effect, the ABA
is subject to these rules.
CCI claimed that DLF imposed unilateral and biased stipulations and dictated the conditions of
the ABA by using its position of strength. DLF disclaimed all obligations and liabilities, requiring
the buyers to accept the Agreement provisions in their entirety.
According to CCI, the agreement's numerous stipulations and DLF's actions in accordance with
them are unfair and discriminatory, making provisions of Section 4(2)(a) of the Act applicable.
Judgement
The court held that DLF was guilty of abusing its dominant position in the real estate market.
The clauses within the agreement were deemed unfair and discriminatory, violating Section 4 of
the Competition Act, 2002.
The penalty of ₹630 crores imposed by the CCI on DLF was upheld.
Detailed Judgement
1. Dominance and Relevant Market Analysis:
- The CCI held that DLF occupied a dominant position in the Gurgaon real estate market,
specifically in the high-end residential apartment market.
- The CCI's definition of the 'relevant market' included geographic boundaries, product type, and
consumer preferences. It found that DLF had a major market share, brand reputation, and
significant control over pricing and terms of agreements. This dominance, combined with the
influence DLF wielded over the apartment buyers, allowed DLF to impose unfair terms in the
ABA.
- COMPAT upheld this assessment, concluding that DLF indeed held a dominant position in this
narrowly defined real estate market.
2. Abuse of Dominant Position (Section 4 of the Competition Act):
- Under Section 4 of the Competition Act, 2002, companies in dominant positions are prohibited
from abusing their dominance in ways that harm competition or consumer welfare.
- The court observed that DLF had imposed unilateral changes to the original project, such as
increasing the number of floors and reducing common area provisions. This reduced the quality
of living space available to apartment owners and deviated from what was promised initially.
These changes were deemed exploitative and a violation of Section 4(2)(a)(i), which prohibits
imposing unfair conditions on consumers.
- The addition of new apartments led to overcrowding and a diminished quality of common
facilities like parking, security, and green spaces. These actions by DLF were deemed unfair,
discriminatory, and an abuse of its dominant position.
3. Retroactive Application of Section 4:
- DLF argued that the ABAs signed between 2006 and 2007 should not be subject to Section 4
since it came into force in May 2009.
- However, the court held that the abusive conduct related to modifying the construction plans
and increasing the number of apartments occurred after the Act’s implementation. Thus, the
provisions of Section 4 applied to DLF’s actions post-2009.
- This decision was based on the principle that any act of abuse that continues or is carried out
after the implementation of the Act falls under its purview, even if the initial agreements predate
the Act.
4. Unilateral and Discriminatory Terms:
- The court examined the clauses within the ABA, finding that they were heavily skewed in favor
of DLF, giving it unilateral power to alter construction plans and impose additional charges.
- DLF used its dominance to insist that buyers accept these terms without negotiation, effectively
binding buyers with non-negotiable conditions that were excessively favorable to the developer.
- The CCI noted that this conduct was unfair, exploitative, and discriminatory under Section 4(2)
(a), and it upheld CCI’s ruling that DLF violated this section.
5. Penalty Imposition and Considerations:
- The court upheld the penalty of ₹630 crore imposed by CCI, finding it proportional to the
severity of the offense and the adverse impact on consumers.
- This penalty was intended as both punishment for DLF’s unfair practices and as a deterrent
against future abuses by real estate developers.
6. Consumer Remedies and Limitations of the Competition Act:
- The judgement highlighted a gap in the Competition Act regarding direct remedies for affected
consumers.
- While the penalty penalized DLF and upheld the public interest, it provided no specific
restitution or compensation for buyers affected by the compressed amenities and altered living
standards.
- The court underscored the need for legislative changes to allow consumer restitution in future
cases where buyer interests have been materially affected.
Conclusion
This ruling aims to restore the balance between property buyers and developers. Although DLF,
the real estate developer, has been hit with hefty penalties totaling INR 6,300 million, the
apartment owners of Belaire, Park Place, and Magnolia have not received any personalized
remedies.
The Competition Act did not apply to the ABA clauses executed before May 20, 2009, so the
tribunal declined to amend them. Furthermore, a significant gap in the Competition Act is the
absence of any option for customer restitution.

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DLF (Delhi Land & Finance) v.

Competition Commission of India

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