Ghaziabad Development Authority Abused Dominant Position By Imposing Unfair Terms On Allottees Of EWS Housing Scheme, NCLAT Imposes 5% Penalty

Ghaziabad Development Authority (GDA) filed an appeal, challenging the Competition Commission of India's (CCI) order wherein the CCI found that GDA had abused its dominant position in the market for the provision of services related to the development and sale of low-cost residential flats for Economically Weaker Sections (EWS) under the Pratap Vihar Residential Housing Scheme. GDA was found to have unilaterally increased the prices of flats and imposed arbitrary and unfair terms on allottees, violating Section 4(2)(a)(i) of the Competition Act. The CCI imposed a penalty of 5% of GDA's average turnover for the last three years in connection with the relevant market. The National Company Law Appellate Tribunal (NCLAT) New Delhi bench comprising Justice Rakesh Kumar Jain (Judicial Member) and Mr. Naresh Salecha (Technical Member) upheld the findings of CCI, observing that GDA constitutes an "enterprise" under Section 2(h) of the Competition Act since its activities were 'commercial' in nature. It concurred with the determination of 'relevant geographic market' as the district of Ghaziabad (not the entire NCR region). The Tribunal held that GDA abused its dominant position in the relevant market and held that its unilateral actions, such as increasing the price of flats from Rs. 2 lakhs to Rs. 7 lakhs without any enabling provision amounted to contravention of Section 4(2)(a)(i) and (ii). Furthermore, it held that imposition of interest on delayed payments by allottees without reciprocal obligations on delayed possession constituted unfair practices. The Tribunal ruled that the 5% penalty imposed was reasonable to deter similar conduct in the future. Brief Facts: Ghaziabad Development Authority (GDA), the Appellant, filed the appeal under Section 53 (b) of the Competition Act, 2002 for challenging the order dated 28.02.2018 passed by the Competition Commission of India (CCI) under Section 27 of the Competition Act. In the impugned order dated 28.02.2018, CCI had found that the Appellant unilaterally increased the price of flats and imposed arbitrary and unfair terms on allottees from the economically weaker sections of society. The conduct of the Appellant was found to constitute an abuse of its dominant position in the market for the provision of services related to the development and sale of low-cost residential flats under affordable housing schemes in Ghaziabad, thereby violating Section 4(2)(a)(i) of the Competition Act. Issues: Whether the Appellant is an 'enterprise' in terms of Section 2(h) of the Competition Act since GDA is an organ of the Government of Uttar Pradesh. Whether the relevant geographic area should have taken the entire NCR rather than the district of Ghaziabad. Whether the Appellant is a dominant player since other players exist in the relevant market. Even assuming it was a dominant player in the relevant market, whether the Respondent/CCI should not have imposed the penalty looking into the mitigating factors. Submissions: By the Counsel for the Appellant: GDA was constituted under Section 4 of the Uttar Pradesh Urban Planning and Development Act, 1973 and engaged in the development and sale of real estate in Ghaziabad and is duly empowered to acquire, hold, and dispose of land while undertaking various development activities within the region. On 27.12.2016, after hearing the parties, CCI erroneously directed the Director General (DG) to conduct an investigation based on an order dated 02.02.2017 issued under Section 26(1) of the Competition Act.GDA is an organ of the State of U.P. and therefore cannot be treated as 'Enterprise' u/s 2(h) of the Competition Act.A proper assessment of its dominant position in the relevant market must consider the criteria laid down in Sections 19(6) and 19(7) of the Competition Act for defining both the 'relevant product market' and 'relevant geographic market'. The DG's classification of 'relevant geographic market' should've included the NCR region. Merely being in a dominant position as per Section 4 of the Competition Act does not constitute a contravention unless there is an abuse of that position. For abuse to be established under Section 4(2)(a)(i) of the Competition Act, there must be evidence of unfair or discriminatory conditions imposed on the purchase or sale of goods or services. Moreover, the Appellant obtained consent from several allottees regarding this adjustment in pricing.Even if it were found to have engaged in an abuse of dominant position under Section 4(2)(a)(i) of the Competition Act, the CCI has erred in determining the quantum of the penalty imposed under Section 27 as the appellant is not a habitual offender and this instance was its first contravention of the Act.CCI's directive for the Appellant to 'cease and desist' from conduct found in violation of Section 4(2)(a)(i) ...

Ghaziabad Development Authority Abused Dominant Position By Imposing Unfair Terms On Allottees Of EWS Housing Scheme, NCLAT Imposes 5% Penalty

Tazeen Ahmed

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