Has CCI penalty against DLF set a precedent for others?

In a setback to DLF, the Competition Appellate Tribunal has upheld the CCI order saying the realty major abused its dominant position in Gurgaon. Compat has asked DLF to make the Rs 630 crore penalty payment within 60 days. (More details)

How will this decision impact the company, other realty players and home buyers? In interview to CNBC-TV18's Menaka Doshi, Balbir Singh, CCI counsel spoke about the ramifications of the order.

Below is a verbatim transcript of the interview

Menaka: Can you give us some more insight regarding the grounds on which the COMPAT upheld the CCI order. The reason I ask for this is because it is important for the audience to understand on what basis the COMPAT has upheld Gurgaon as the relevant market, thereafter established the dominance of DLF in that relevant market and thereafter established that this is abuse of dominance.

A: It is very difficult for me to comment specifically on the findings of tribunal -- on what basis tribunal has gone ahead and confirmed the relevant market dominance and abuse.

However, I would like to believe that the order has largely accepted the findings given by CCI in its order where on certain parameters saying that certain class of built-up area for the apartments can be classified as a product market and the geography market can be related to a particular market like Gurgaon because it has got its own features, which qualify the product in question as the relevant product.

Menaka: This is a DLF case but I am wondering whether this empowers resident groups against other real estate players in the country as well given the hefty penalty that DLF will likely be paying.

A: I would not like to believe so because DLF roughly has got the elements a dominant player may have, which other players may not have. It is not saying that a blanket application of this order for other builders also because one needs to qualify to come under this act to be a dominant player.

Dominant player defined in law has got certain features and it is going to be really hard for anyone to simply say that because there is DLF order and consequently all the builders in the country are dominant qua the consumers. So, that approach is not going to work.

As a matter of fact, after DLF case, CCI itself has rejected lot of complaints filed by the consumer against various other builders. So, you can't take it saying simply that this is going to open a door for consumers in that sense. I would not like to believe so.

Menaka: It is very likely that DLF will go to the Supreme Court. I want to know what is the likelihood of DLF getting a stay in the Supreme Court, a stay against having to at least pay this penalty over the next 60 days because that is going to be the big material impact on DLF and how much of that Rs 630 crore that they might have to pay to the Supreme Court or pay as a deposit before they are able to obtain a stay on the penalty in itself and also appeal the COMPAT order in the Supreme Court?

A: It is very speculative. We need to see the order in detail, the basis given for the penalty, the entire amount of penalty being confirmed. So, the Supreme Court certainly is going to look into the order and see that if this kind of penalty is justified. Secondly, at the admission stage itself, whether this penalty should be stayed or not, it is very hard to confirm.

But all I can say is certainly we would assail this order of the COMPAT before the Supreme Court at the admission stage as well as the final hearing stage.

DLF stock price

On May 19, 2014, DLF closed at Rs 182.45, up Rs 12.80, or 7.54 percent. The 52-week high of the share was Rs 254.75 and the 52-week low was Rs 120.25.

The company's trailing 12-month (TTM) EPS was at Rs 1.43 per share as per the quarter ended December 2013. The stock's price-to-earnings (P/E) ratio was 127.59. The latest book value of the company is Rs 67.20 per share. At current value, the price-to-book value of the company is 2.72.