[The following guest post is contributed by Sarthak Raizada, a 4th year law student at Dr. Ram Manohar Lohiya National Law University, Lucknow]
The issue of relevant market for an anti-trust analysis has been the subject matter of considerable debate with respect to the real estate sector. The Competition Commission of India (“CCI”) has extensively dealt with the said issue in a plethora of decisions. The recent decision of the CCI in Shri Sunil Bansal & Ors v M/s Jaiprakash Associates Ltd has reignited this debate on relevant market. The Commission dealt with the issue of relevant market by comparing the features of integrated townships with standalone residential apartments.
On 26 October 2015, the CCI dismissed complaints alleging abuse of dominant position against the real estate conglomerates Jaypee Group entities, Jaiprakash Associates Limited (“JAL”) and Jaypee Infratech Limited (“JIL”) in the region of NOIDA and Greater NOIDA.
The Commission while relying on market share, actual sales and financial resources of several real-estate players in the market, opined, “Since JAL/ JIL is not in a dominant position in the relevant market, the question of examining the alleged abusive conduct does not arise.”
Factual Matrix of the Case
The Informants alleged that Jaiprakash Associates and Jaypee Infratech have abused their dominant position through imposition of highly arbitrary, unfair and unreasonable conditions in the agreements for allotment of residential apartments thereby, constituting an infringement under Section 4(2)(a) and 4(2)(e) of the Competition Act, 2002.
Report of the Director General
The CCI directed the Director General (“DG”) to conduct an investigation into the matter. After consideration of a host of issues, the DG in his report delineated the relevant product market as ‘the provision of services for development and sale of residential apartments’.
After consideration of the report submitted by the DG, the CCI directed him to further investigate into the matter. In the consolidated supplementary report submitted by the DG, the issue of relevant product market was re-examined. The DG identified “integrated townships” as the relevant product market after comparing integrated townships with standalone residential apartments. It observed that integrated townships offers a formidable infrastructure and such facilities/amenities which are otherwise absent in standalone residential apartments. The DG identified that there is no sufficient degree of interchangeability between integrated townships and standalone residential towers which would allow the customers to switch from one product to another. Hence, the two form separate and distinct products.
On the issue of dominance, the DG observed that Jaypee enjoyed a dominant position. It observed that it had the highest market share in the relevant market. It also stated that other advantages such as size and resources, total land bank, assets and surplus and a cement manufacturing plant allowed Jaypee to hold a dominant position.
After a perusal of the allegations levelled in the complaint against the Jaypee Group and its subsidiaries, the DG concluded that the terms and conditions imposed in the Provisional Allotment Agreement constituted a violation under Section 4 (2) (a) (i) of the Competition Act.
Findings of the CCI
The CCI proceeded to assess the relevant market having due regard to the relevant product and relevant geographic market.
With respect to the issue of relevant product market, the CCI observed that the concept of “integrated township” is a nebulous one and is still in a state of evolution, while acknowledging the facilities an integrated township may have to offer. At this juncture, it is very pertinent to note the observation made by the CCI under paragraph 90 of its order. The CCI observed that the question of whether integrated township constitutes a different product market would depend on several factors; thus the determination of the relevant product market would depend on the factual matrix of particular case.
While distinguishing the facilities offered by an integrated township with that of standalone apartments, the CCI said that it is not necessary that the residents of the projects under consideration will not avail similar facilities/ amenities offered outside the said project. The uniqueness of the integrated township under question was further diluted by the close proximity of the integrated township with the developed urban areas. On the basis of this reasoning, it observed that there existed sufficient degree of interchangeability between residential apartments in a standalone residential towers and integrated townships. Hence, the ‘provision of services for development and sale of residential apartment’ was identified as the relevant product market.
On the issue of relevant geographic market, the CCI concurred with the report of the DG. It stated that the supply of real estate development in Noida and Greater Noida are clearly distinguishable from the conditions prevalent in other NCR regions on the basis of the rules and regulation in force, prices of property owing to the connectivity with the region.
After determination of the relevant market, the CCI determined that JAL did not enjoy a position of dominance, in the relevant market. It reasoned that several players exist in the relevant market offering wide range of residential apartments with world class amenities in the relevant geographic market. Taking into consideration the market share, actual sales made and financial resources held by other players in the market, it held that JAL did not have the ability to influence the competition in the relevant market.
Finding absence of dominance in the relevant market, the CCI did not consider it relevant to make an observation on the issue of abuse of dominance.
Analysis of the Decision
The order of the CCI serves a strong warning for developers of integrated townships. With the expansion of cities, the development of integrated townships has gained significance. Even though the concept of integrated townships is in the nascent stages of its development, it has become a potential solution to the decreasing future potential of development in the urban areas.
While the order of the CCI rejected delineation of “integrated townships” as the relevant product market, it did not reject the plausibility of existence of an “integrated township” as a separate product market. The central premise of the CCI’s decision with respect to relevant market was based on a factual analysis of the case. It identified that uniqueness of the product would depend on a host of issues. Hence, the definition of the relevant product market in such cases would depend on facts and circumstances in a given case. Therefore, the decision should not be interpreted as an outright rejection of “integrated township” as a separate product market. Hence, development of future townships and any exploitative practices adopted by its developers, if any, maybe the determining factors in determining the abuse of dominant position of such developers.
- Sarthak Raizada