Friday, June 24, 2016

Practice of builders to Copy Paste same arbitrary clauses in all agreements isn't anti-competitive

Competition Act: Mere inclusion of common arbitrary clauses in the contract for sale of residential flats by builders couldn’t be said to be anti-competitive

In the absence of any evidence of meeting of minds between any two or more developers of real estate with an intention of causing an appreciable adverse effect on competition, there could be no violation of Section 3 as was complained/ informed of by the petitioner/informer. Facts:

a) The petitioner alleged that real estate developers have an understanding amongst them whereby they compel the purchasers of real estate to sign one sided flat buyer’s agreement containing arbitrary clauses which are exploitative of buyer

b) The CCI passed an order under Section 26(1) directing DG to investigate the conduct of residential apartment complex builders and reported that certain practices are being commonly carried on by the developers by way of tacit agreement which caused implications for consumers and resultantly determining the final prices of apartments in contravention of Section 3(3)(a) of the Competition Act

c) The CCI differed from the findings of the DG on issue of contravention of provisions of Sections 3(3)(a) & (b) of the Competition Act and held that sufficient evidence is not available on record which warrants a finding of contravention of the provisions of the Act and accordingly closed the matter. 

On writ plea, the High Court held as under:


1) Finding no error in such reasoning/logic/approach of CCI, the High Court, in the absence of any evidence of meeting of minds between any two or more developers of real estate with an intention of causing an appreciable adverse effect on competition, there could be no violation of Section 3 as was complained/ informed of by the petitioner/informer

2) Merely because two or more persons are doing similar or identical thing, will not find an agreement within the meaning of Section 3(1) unless some, if not all the way, meeting of their minds or common intention to do so is established

3) Further it said that, “a large number of developers of real estate, to save legal cost, merely copy paste either the agreements of their earlier real estate projects or the agreements as in vogue in the market. This is not to say that the Advisors in the field of real estate do not themselves follow the practice of cut and paste and which in my practical experience, is responsible to a large extent for the commonality found by the DG and from which commonality DG presumed contravention of the provisions of the Act”.

4) Therefore, where the petitioner failed to produce any evident evidence of meeting of minds between any two or more developers of real estate with an intention of causing an appreciable adverse effect on competition, there could be no violation of Section 3 as was informed of by the petitioner. - [2016] 70 taxmann.com 307 (Delhi)
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