The Competition Commission of India (CCI) on Tuesday decided to impose a penalty of around R630 crore on DLF, the country?s largest real estate firm, holding it guilty of abusing its dominant position. According to sources, the penalty amounts to 7% of the company?s average annual turnover of the last three years. The competition watchdog has found DLF in violation of section 4(2) of the Competition Act, 2002. The probe followed a complaint filed by the Belaire Owners? Association.
?Abuse of dominant position in this case is in respect of the basic necessity of housing. The earlier deliberation on the elements and the extent of abuse make it clear that DLF has been grossly abusing its dominant position, and that too against a vulnerable section of consumers, who have little ability to act or organise against such abuse. The penalty, therefore, has to be commensurate with the severity of the violation through such blatant abuse of dominance,? the CCI said in its 237-page order.
When contacted, Rajeev Talwar, DLF?s group executive director, told FE: ?We will examine the order and explore all legal options. We continue to believe we have a strong case.? Company officials said it may move the Competition Appellate Tribunal (CAT) against the order.
After the order, the DLF scrip plunged 5.92% or R11.90 to close at R189 on the BSE after reaching a high of R204.25 in early trades. BSE?s Realty Index, in which DLF has 31.99% weightage, fell 5.38%, while the Sensex fell 0.65%.
The Section 4(2)(a) of the Competition Act, under which DLF has been found guilty, comes into play when a company directly or indirectly imposes unfair or discriminatory conditions or prices with respect to the purchase or sale of goods or services. This is the second such order in the past two months.
In June, the CCI had penalised the National Stock Exchange for abusing its dominant market position. NSE was asked to pay 5% of its average annual turnover and was issued an order to ?cease and desist? from unfair trade practices in currency derivatives trading.
The CCI examined the DLF the matter for over a year before passing the order. The petition before CCI, filed by Belaire Owners Association last year alleged that DLF failed to deliver the residential projects on time and put ?discriminatory and abusive clauses? in the apartment agreement provided to the allottees. It also says the builder is abusing its dominant position in the market. The complaint alleged that DLF increased the number of floors in the apartment complex from the original figure given to the buyers. This led to a significant increase in the number of apartments in Belaire ? from 384 to 564. Last September, the Commission had imposed an ad interim stay on DLF?s proposed luxury projects ? Park Plaza and The Belaire ? in Gurgaon and had asked DLF not to cancel allotments of apartments. Back then, the CCI also asked the realty major to refrain from creating third party rights. This came after complaints were lodged by the Belaire Owners? Association and Park Plaza Resident Welfare Association who alleged that DLF had failed to deliver the residential flats on time by putting ?discriminatory and abusive clauses? in its agreements with the allottees.