Specially Defined Relevant Markets: A Case for Reconsideration

[Kavya Lalchandani is a 3rd year Student at National Law University Odisha]

Abuse of dominant position is defined under section 4 of the Competition Act, 2002 as the ability of an enterprise to behave independently of the competitive forces in the market and affect the consumers in its favour. It is a position of strength that is enjoyed by a particular enterprise in the relevant market.

Being a dominant enterprise per se is not prohibited under the Act, but abuse of this dominant position is. For establishing abuse of a dominant position by a particular entity, it has to be proved that it is an enterprise under the Act, identify the relevant market in terms of both product (goods and services) and geography, prove the dominance in the relevant market and establish the abuse of dominance.

The key to identifying the abuse by a particular enterprise is in identification of the correct relevant market. The relevant market should not be too narrowly or broadly defined and should represent the correct position of an enterprise in the market. The problem of defining the relevant market arises when there are special product markets as in the case Ms. Dejee Singh and Ors. v Sana Realtors Pvt. Ltd.

Factual Background

Sana Realtors Pvt. Ltd., the Opposite Party, is a real estate company and came up with a concept called SOHO (Small Office Home Office) through which the same property acted both as a house and office property in Gurugram. This was the first project of this unique nature in Gurugram. Pursuant to such advertisements, the Informants in this case had purchased the houses in 2009-10.

Relevant Contentions of the Informants

The Informants contended that the agreement was an abusive one as it was one-sided and arbitrary as drawn by the Opposite Party; therefore, it had abused its dominant position in the market coupled with delay of delivery of possession of the said properties. They also argued that the relevant market of the services provided was SOHO as distinguished from the markets of residential apartments, commercial spaces, etc. The concept had lured a large number of people and, therefore, it should constitute a separate market as the other players were not providing the same service and were not substitutable. Since the relevant market is defined in above terms and agreement was an abusive one, the argument was that the Opposite party had violated section 4(2)(a) of the Act.

Commission’s Definition of the Relevant Market

The Competition Commission of India noted that the Opposite party was an enterprise as stipulated under the Act as it provided housing services to the consumers. However, the Commission did not agree on the delineation of the relevant market as suggested by the Informants. The Commission noted that the relevant product market should be “market for commercial units for office space” due to following reasons:

– The Opposite Party had advertised the SOHO model as “small and affordable office space to ensure beauty and comfort catering to the needs of the corporate, small and medium enterprises”; therefore the purpose of the scheme was to provide a comfortable and affordable office space.

– The only distinguished feature from others is the marking of the bedroom in the proposal, which makes it a home office. This feature is not enough in itself to qualify as a separate product market.

– Such a feature can be added by the consumer also and the discretion is with the consumer to modify the said office with this feature subject to the contracts that they may have signed.

The geographical market is not in dispute and was decided to be Gurugram based on factors like presence of customers, connectivity, etc. Therefore the relevant market was decided to be “the market for commercial units for office space in Gurugram”.

The Commission therefore came to a conclusion that there is already a presence of big developers like DLF in the relevant market and therefore the Opposite party is not a dominant enterprise. Since it is not dominant, it cannot said to have abused the dominant position.

A Debatable Decision?

It is submitted that the decision of the Commission is questionable in its delineation of the relevant product market as market for commercial units for office space and should have been restricted to SOHO. It failed to identify the impact of such identification of the relevant market. One of the most important aims of the Act is to protect the interests of consumers and, to do so, it has to take their interests in mind.

The consumers cannot be denied justice on account of some modifications that can be made to a particular product or service which the enterprise is offering. The market cannot be broadly defined relying on the advertisement itself. The impression and the impact that it creates is equally important. The concept was the main USP to which the consumers were attracted to.

The act of the Opposite Party qualifies to be deficiency of service and abuse of dominance in the relevant market. Through advertisement, the Opposite Party had lured several customers and had created a sufficient demand in the market. The exploitation of consumers by real estate companies is not new and the Commission should have, in the past like in the case of DLF, imposed a penalty and issued directions to the Opposite Party in this case too.

It is to be understood that such special cases might arise in future too where the Commission will have to make exceptional relevant markets, especially the product market, to bring justice to the consumers; otherwise it will defeat one of the main purposes of the enactment. There can be no single rigid definition in all the cases; it depends on the facts and circumstances of each case, but the Commission has to be mindful of the very purpose of the Act.

Kavya Lalchandani

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