The Competition Commission of India (CCI) by way of its order dated October 26, 2015 has exonerated M/s Jaiprakash Associates Ltd and M/s Jaypee Infratech Ltd. (OPs) by majority view for alleged abuse of dominance on an information filed by five individuals (Informants) who were the applicants/ allottees of the residential unit in the project of the OP. Informants have alleged violation of section 4 of the Act, i.e. abuse of dominant position by imposing highly arbitrary, unfair and unreasonable conditions in the agreements for allotment of residential apartments which blatantly violated the principles of free and fair competition.
Facts of the Case:
The Informants are allottees of residential units in ‘Jaypee Aman’ (Noida), 'Jaypee Sun Court' and Jaypee Sea Court (Greater Noida). They alleged that M/s Jaiprakash Associates Ltd. (“JAL”) along with its group company M/s Jaypee Infratech Ltd. (“JIL”) abused its dominant position by imposing highly arbitrary, unfair and unreasonable conditions in the agreements for allotment of residential apartments which violated the principles of free and fair competition and thereby contravened sections 4(2)(a) and 4(2)(e) of the Act. The information was against Jaiprakash Associates Ltd (JAL), Jaypee Infratech Ltd (JIL), and Deutsche Postbank Home Finance Ltd. It was alleged that Application form did not mention name of the project · Further, columns relating to consideration (basic sale price, car parking, preferential location charges etc.) were left blank and the undertaking along with the application form was onerous and one sided. Moreover, introduction of clauses relating to maintenance deposit/ maintenance charges/ club membership fees were not told at the time of booking. Further, it was made obligatory for applicant/ allottee to sign a separate maintenance agreement for maintenance of common areas and facilities. Presence of clauses stating that applicant/ allottee would have no right, title or interest on the premises either during its construction or after its completion till the execution of Indenture of Conveyance. Unilateral changes in the original plan and instead of 24 floors, the plan was modified to build 28 floors; Delay in delivery of possession and since the agreement was highly one sided and arbitrary, no compensation was provided for this long delay in delivery; Terms and conditions provided an absolute right to JAL to reject/ not to allot the apartment to the applicant without assigning any reason while the applicant had to give an undertaking that the application for allotment was irrevocable, unless JAL desired so.
Investigation by Director General
The DG delineated the relevant product market as ‘the provision of services for development and sale of residential apartments’, after considering several factors such as : same market with similar services; company’s brand name; number of projects, value; design; location etc. DG considered that the relevant geographic market would be that of Noida and Greater Noida. The DG examined number of dwelling units by builders in the relevant geographic market till 31.03.2012. It was noted that the top 3 groups were Amrapali, Jaypee and Supertech which had 36,211, 33,253 and 21,445 dwelling units respectively. Next to them was 3C Company which had 11,037 dwelling units to offer for sale. Other builders/ developers did not have matching figures to compare with the top 4 as the number of dwelling units of the next 5 ranged between 9043 to 21 only. The top market share on the basis of dwelling units was that of Amrapali Group with 28.30 per cent share and Jaypee Group came second with 25.99 per cent. Supertech Limited came at third position with 16.76 per cent and was still close with Jaypee Group whereas 3C Company and Unitech were there with 8.63 per cent and 7.06 per cent respectively. The DG also concluded that the though several allegations were found to be unfair, the same did not emanate out of dominant position of Jaypee Group. DG also pointed out that OP is not at any commercial advantage over its competitors and after considering other aspects of entry barrier, consumer dependence and countervailing buying power, the DG opined that OP did not have the position of strength that could enable it to operate independently of competitive forces prevailing in the relevant market or to affect its competitors or consumers in its favour.
CCI, after considering the objections to the above report, ordered a supplementary investigation in the same case directing consideration on the aspect whether an integrated township constituted a separate relevant market by itself or not. DG accordingly conducted further investigation and concluded in the supplementary report that the relevant market was “sale of residential apartments in integrated townships in Noida and Greater Noida”. Jaypee Group was found to be dominant and also having abused its dominant in the said relevant market.
CCI observed that JAL/ JIL does not have the ability to influence the conditions of competition in the relevant market of for provisions of services for development and sale of residential apartments in Noida and Greater Noida. Further, the market share of the Amrapali Group was found to be higher than that of the Jaypee Group, on the basis of the actual sales made by them in the period 2009 to 2011. However, while rejecting the narrowed definition of the market, the CCI observed that the concept of “integrated township” is a new marketing concept and is still an evolving one and has not reached to a level that each such township can be considered as a relevant market in itself, particularly, when all such so called township have similar features and are, therefore, substitutable from a customer’s point of view. Therefore, JAL/ JIL is not in a dominant position in the aforesaid relevant market, the question of examining the alleged abusive conduct does not arise.
The Minority view on the other hand held that due to specific policies designed by the Government for Integrated townships and unique features of such townships, which make the apartments in such townships as “distinct and unique products”, which are not substitutable with the apartments in standalone apartments, the relevant market should be construed as “sale of residential apartments in integrated townships in NOIDA/ Greater NOIDA ”, in which the Jaypee Group has the largest market share with largest number of apartments ,besides it largest land reserve. Therefore, Jaypee Group is dominant in such market. Further, after examining the one sided clauses in the Flat Buyers Agreements, the minority view held the terms and conditions in the apartments buyers agreement were unfair and violative of section 4(2)(a)(i) of the Act. Consequently, the minority order imposed a penalty of INR 666 Crore of Jaypee Group.