CCI dismisses unfair trade complaint against Jaypee Group

Split verdict, with two of 5-member bench saying its firms were abusing a dominant position; majority rejects view

In a major relief for the Jaypee Group, a majority on the Competition Commission of India (CCI) have dismissed a complaint on its alleged abuse of a dominant position in the Noida and Greater Noida real estate maket against two of its companies, Jaiprakash Associates and Jaypee Infratech.

However, two members of the five on the CCI bench have dissented. Their order says the other three, including CCI chairman Ashok Chawla, have erred in delineation of the relevant product/service market.

“We have further examined the status of the Jaypee Group in the relevant market and have found it to be clearly dominant. We are also convinced of (its) abusive conduct, after due examination,” said the two members.

The majority stated the two group companies did not have a dominant position in the market for provision of services for the development and sale of residential apartments in Noida and Greater Noida. “Since the group companies are not in a dominant position in the relevant market, the question of examining the alleged abusive conduct does not arise,” they said.

The regulator analysed five similar complaints against the group. The two dissenting members, S L Bunker and Augustine Peter, wrote their separate order, asking the company to 'cease and desist' from practices in contravention of the Competition Act. Plus, a Rs 666-crore penalty, five per cent of the average turnover of the years 2011-14. The company does not have to follow the two-member order.

CCI said it had found a case for investigation in November 2012 on the stated charges and asked for a detailed probe through the office of its Director General, Investigation. The first DG report found no evidence of a dominant position of the Jaypee group in the sales and services of residential apartments in Noida and Greater Noida. However, the regulator asked the DG to further investigate and give a supplementary report. This latter report concluded that due to some unique features, there existed a separate relevant product market of ‘integrated township’, not substitutable with standalone residential projects. “Dominance in this relevant product market was analysed on the basis of total land banks and land reserves, and it was noted that the group holds the largest quantum of land in comparison to its competitors,” said the two-member minority order.

The majority view, however, refused to consider the ‘integrated township’ as a distinct and relevant product market. “Jaypee Group, armed with command over land banks far above its competitors, with substantial financial resources and enjoying vertical integration, possesses tremendous potential to expand its real estate business in the relevant market in the coming years, and it is therefore important to put a break on its practices that while benefitting itself, cause severe harm to competition and consumers in the relevant market,” the minority order stated.