Rs 630 cr penalty on DLF for unfair trade practices

Anti-competitive practices watchdog Competition Commission of India (CCI) has imposed a penalty of Rs 630 crore on India’s largest real estate developer, DLF Ltd, for abuse of market dominance and unfair trade practices.

The penalty amounting to seven per cent of Rs 9,006.27 crore, the company’s average annual turnover in the last three years, was slapped after CCI found merit in complaints of alleged “abuse of dominant position” by putting “discriminatory and abusive clauses” in the apartment agreements provided to the allottees of two of DLF’s high-profile residential projects in Gurgaon.

DLF shares closed 5.92 per cent lower on the Bombay Stock Exchange at Rs 189 a share on Tuesday.

When contacted, DLF Group Executive Director Rajeev Talwar told Business Standard, “We are reading the order.”He said the company was in the process of consulting legal experts on how to proceed.

In a unanimous verdict on August 12, CCI ordered DLF to cease and desist from formulating and imposing “unfair” conditions in its agreements with buyers in Gurgaon. The commission also wanted DLF to modify such conditions within three months.

The two projects are expected to have a total of 2,200 flats, priced between Rs 1.5 crore and Rs 3 crore each, making the total worth of the apartments Rs 4,500-5,000 crore.

The projects, which started in August 2006, were expected to be completed in three years, but the developer extended the deadline later. In addition to the delay, DLF increased the number of floors in the apartment complex from the original figure given to customers.

This led to the number of apartments in one project, Belaire, increasing to 564 from 384, which irked the customers as it meant more flat owners must share the same common facilities.

The CCI verdict is expected to have an overall impact on real estate players, as its investigation has found the unfair conditions imposed by DLF are a common practice among several developers.

The company has the option to challenge the CCI verdict in the Competition Appellate Tribunal.