Competition Commission's Penalty on DLF and Likely Effects on Indian Real Estate Industry

Abstract:

This case study deals with the penalty imposed by the Competition Commission of India on DLF - the largest realty firm in India - for abusing its dominant position and for its unfair trade practices. The Belaire Owners' Association (BOA), representing the apartment buyers of The Belaire Housing Complex, filed a case against DLF (builder of the complex), before the Competition Commission of India (CCI) on May 5, 2010. The BOA alleged that DLF had imposed one-sided conditions in the sale agreement and that it had failed to complete the project within the promised time. The CCI after investigating, concluded that DLF was guilty and imposed Rs. 6300 million (equivalent to 77% average turnover of the company for years of 2008-09, 2009-10, 2010-11) as penalty. DLF contested the CCI's order in the Appellate Tribunal.

This was the first time that the CCI had imposed a hefty penalty on a real estate company over consumer charges. Experts were divided in their opinion over the likely effects of the order on the Indian real estate industry, which was dominated by small players and marred by lack of transparency along with regulatory bottlenecks. While some anticipated a large-scale consumer movement, followed by many such petitions, others ruled out any such possibility citing unreasonable judicial delays. The case study helps in understanding the impediments to Indian real estate consumers and in debating the likely impact of the CCI's order on the Indian real estate sector.

Issues:

» The general trends and practices in the Indian real estate industry.
» Whether DLF was guilty as charged by its customers.
» The implications of the hefty penalty imposed by the CCI on DLF.

Contents:

Keywords:

Real Estate Sector in India, Competition Commission of India, DLF, The Belaire Project Owners Association, Transparency in Indian Business Dealings, Abusing Dominant Position, Consumer Activism, Relevant Market, Consumerism

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