Competition Commission's Penalty on DLF and Likely Effects on Indian Real Estate Industry |Business Ethics|Case Study|Case Studies

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

            
 
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Case Details:

Case Code : BECG120
Case Length : 13 Pages
Period : 2011
Organization : DLF
Pub Date : 2012
Teaching Note : Available
Countries : India
Industry : Real Estate

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.



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Excerpts Contd...

Order of CCI

The CCI, after considering the agreement and findings of the DG, concluded that DLF had abused its dominant position by incorporating clauses in the agreement, which put the allottees at a distinct disadvantage. In its verdict, the CCI stated, "It is noted that the Competition Act only requires this Commission to ascertain if some conduct is "unfair" in terms of Section 4 of the Act and is being carried on by a dominant enterprise. This Commission has no doubt that the nature of clauses and conduct as indicated in earlier paragraphs are blatantly unfair, even exploitative. The dominant position of DLF Ltd. already been established. Therefore, we find no force in the arguments of the DLF in this regard.". ..

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DLF Response to the Order

DLF filed an appeal in the Competition Appellate Tribunal (COMPAT) on October 10, 2011, seeking a review on the order passed by the CCI. In its appeal, DLF challenged the way the CCI had defined the relevant home developers' market and DLF's dominant position in the market and, therefore, the abuse of its dominant position...

Park Place Residents Controversy

Another case was filed against DLF by Park Place Residents Association on May 5, 2010, before the Competition Commission of India. Park Place was another residential project of DLF in Gurgaon. The charges by the Park Place residents were similar to those filed by BOA and related to the builder abusing its dominant position and the unfair conditions in the agreement with the buyers of the flats...

Implications

The real estate sector had a great deal of importance in the Indian economy. With the increased level of income and standard of living, the market for residential houses had grown over the years. But the market was characterized by a huge shortage in the supply of residential units. According to some estimates, by the end of the Eleventh Five Year Plan (2007-12), the housing market would fall short of demand by 26.53 million units...

Exhibits

Exhibit I: Income Levels and Demand for Housing
Exhibit II: Key Demand Drivers in Indian Real Estate Sector
Exhibit III: Major Developers in India

 

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