DLF may approach Compat next week against CCI order

Realty giant DLF may approach the Competition Appellate Tribunal (Compat) next week to challenge an order by competition watchdog CCI to pay a Rs 630 crore penalty for abuse of dominant market position.

The company is considering challenging the order on the basis of the Competition Commission of India's (CCI) classification of DLF as a "dominant player" in the relevant market, as well the competition watchdog's jurisdiction over the matter.
In its order dated August 16, the CCI found the company guilty of abusing its dominant market position and asked it to pay a penalty of Rs 630 crore. After the CCI order, DLF had said that it would examine all options, including an appeal before Compat, to contest the penalty.
Sources said DLF is likely to challenge the order next week before Compat, wherein it would also question why the CCI did not serve a show cause notice before passing the order, as was the case with another recent order passed against the National Stock Exchange (NSE).
DLF was found to be market leader based on a third-party analysis of the overall country-wide turnover of companies present in the Gurgaon real estate market.
However, DLF is contending that market position should be determined on the basis of the number of housing units sold in the entire NCR region, after taking into account secondary market housing sales and not just the primary market or units sold directly by developers, sources said.
"There is enough competition in the Gurgaon market in each category of the residential segment. There is no entry ban for any developer and there is no cartelisation," a source said, while asserting that the company did not violate the competition regulations.
To buttress its case of not being a dominant player, DLF is also arguing that it was given only 6% of the total land development licences issued by the government in the Gurgaon region between 2002 and 2009, they added.
DLF had engaged leading property consultant Jones Lang LaSalle to conduct an analysis on its and other players' market share in the NCR region, wherein the company was found to have a market share of only 2.13% in 2007, and then 3.6% in 2008.
DLF's market share rose to 4.8% in 2009, but fell to just 0.4% in 2010 -- when it was not even among the top-50 developers of NCR region, the report said.
CCI had passed the order against DLF on a complaint filed by Belaire Owner's Association, a group of buyers at the company's Belaire housing project in Gurgaon.
In May last year, the association complained to CCI that DLF had promised to complete the residential project in 2009, but the buyers were yet to get possession.
Besides, it alleged that DLF "imposed highly arbitrary, unfair and unreasonable conditions on the apartment allottees of the housing complex, which has serious adverse effects and ramifications on the rights of the allottees".
It also alleged that DLF had announced the project before getting necessary conditions and clearances.
However, the company claims to have already compensated the buyers for the delay in form of a higher penalty clause and provide certain additional amenities for the homes without any extra charge.
On the complaints related to the company increasing the number of floors to 29 from 19 originally proposed, the company is contending that the application forms provided for such changes in the project.
Days after its penalty order in the Belaire matter, CCI had also passed a 'cease and desist' order against DLF for the company's Park Palace housing project in Gurgaon.
In the second order, the company was asked to stop formulating and imposing unfair conditions in its agreements with home buyers, but the CCI did not impose any fine in this case.
After this order also, DLF had said it would be "filing an appeal with the Competition Appellate Tribunal shortly, as the company continues to believe that it has a strong case".