CCI Rejects Charges Against Jaypee Group; 2 Members Dissent

New Delhi: By a majority order, the Competition Commission of India has dismissed charges of dominant market position abuse against Jaiprakash Associates in the real estate sector.

Dissenting with the majority decision, two members of the fair trade regulator said a penalty of Rs 666 crore should be imposed as the company was in violation of competition norms. However, this was overruled by the CCI Chairman and two other members who said the JP group was not a dominant player in the relevant market – that is development and sale of residential units in their ‘integrated townships’ in Noida and Greater Noida.

The competition watchdog also asked the company and other players in the realty sector to take appropriate voluntary measures to address the concerns of the flat buyers.

CCI Chairman Ashok Chawla and two members – Sudhir Mital and U C Nahta – said that JP Associates and Jaypee Infratech Ltd did not “enjoy a position of dominance in the market for provision of services for the development and sale of residential apartments in Noida and Greater Noida”.

Dissenting with the majority order, two CCI members – S L Bunker and Augustine Peter – ruled that JP Group enjoyed dominant position in this case and directed it to “cease and desist” from indulging in anti-competitive practices.

The 137-page order came after CCI’s probe into the alleged abuse of dominant position with regard to development and sale of residential units in JP Group’s integrated townships in Noida and Greater Noida.

According to the majority order, the investigation by CCI’s Director General found that the market share of Jaypee Group was much less than the rival competitor and it did not have any commercial advantage over its competitors due to its economic strength or due to its size or resources.

Quoting the DG’s investigation, this order said Jaypee Group was behind Amrapali, its next rival competitor, and “this clearly demonstrates that it (Jaypee) does not have the biggest market shares in the relevant market”.

The minority order, however, said that DG found various conditions imposed on buyers, including for delay in possession and in the undertaking given with application, were one sided and “can be considered unfair”.

According to the minority order, the imposition of unfair and discriminatory condition by a dominant player has serious adverse effects on the market and on consumers.

Jaypee collected several thousands of crores of rupees from the consumers on the pretext of offering residential units in ‘integrated townships’ and “cannot now be allowed to turn around and say that it is a ‘marketing gimmick’ when it is subjected to the scrutiny of this Commission”, the two dissenting members said in their order.

The proposed penalty of Rs 665.94 crore translates into 5 per cent of the company’s average three-year annual turnover.

There was no immediate comment from the company.

The penalty amount, if it had not been overruled, would have been the biggest imposed by fair trade regulator CCI on a real estate player.

The regulator had slapped a fine of Rs 630 crore on DLF in November 2012 and the ruling was first challenged in Compat and is now before the Supreme Court.