Relevant market for realty firms a twister for CCI

Last Updated: Wed, Jun 27, 2012 19:55 hrs

After imposing a penalty of Rs 630 crore on DLF, India’s largest real estate company, the Competition Commission of India (CCI) was flooded with cases against builders. While dismissing these, the commission considered different benchmarks and yardsticks.

In the case of Emaar MGF, CCI looked at the relevant market as ‘residential accommodation’ in Gurgaon. For DLF (Park Place and Belaire), the relevant market was the ‘high-end residential’ segment in Gurgaon, since the cost of each flat was more than Rs 1.5 crore. However, flats in Emaar MGF’s Palm Drives project were priced at over Rs 2 crore.

In the order pertaining to Unitech’s project ESCAPE, CCI said, “Since the apartment in the case comes to about Rs 95 lakh...the relevant market will be high-end residential apartments.”

In the case of another Unitech project, Unitech Habitat in Greater Noida, CCI considered the relevant market as residential units on sale in Noida, Greater Noida and the area around the Noida Expressway, without specifying whether these were high-end or low-end. The apartments are priced at about Rs 50 lakh, according to the CCI order.

Senior CCI officials were not available for comment.

In a case against Tulip Infratech, CCI considered the relevant market as ‘multi-storeyed residential apartments’ in Gurgaon.

To prove DLF’s dominance in Gurgaon, the competition watchdog had considered all-India sales figures of realty players across the country to establish their market share in Gurgaon. Since no public data was available on residential sales in Gurgaon, CCI relied on all-India sales data provided by the Centre for Monitoring Indian Economy, and had considered various developers in Gurgaon. This was challenged by many as an inappropriate manner of calculating market share, since a developer might be a dominant leader in one market, but have little presence in another.

In other cases, for instance Unitech’s, CCI, in its order, said the data on market capitalisation provided by the informant accounted for the operations of the company across the country, not just in Noida. “An enterprise may be dominant in one geographic market, but not in another. Market capitalisation of an enterprise with all-India operations cannot be a criterion for considering its dominance in a particular area,” the order stated.

In other orders, CCI clearly defined dominance based on data available in the public domain.

CCI has used the DLF judgement as a benchmark to dismiss most other cases.

“Since the commission had found DLF in the dominant position in the relevant market, in respect of high-end residential accommodation in Gurgaon, Emaar-MGF cannot be in the dominant position,” read the CCI order dismissing the case against Emaar-MGF’s Palm Drive project in Gurgaon.

In the case against Unitech’s ESCAPE project in Gurgaon, the CCI order stated, “Since the commission has found DLF is a dominant player, there cannot be another enterprise which cannot be held dominant in the same relevant market.” The case was, thus, dismissed.

CCI held DLF guilty of abusing its dominance in the high-end residential segment in Gurgaon for its projects Belaire and Park Place in August 2011 and Magnolia in March 2012. The company was slapped a penalty of Rs 630 crore, which has been stayed by Competition Appellate Tribunal. According to the May 21 hearing, any modification in the terms and conditions of the buyer-builder agreement by CCI could arise only after the tribunal’s final judgement on the case.

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