2024 (11) TMI 1003 - CCI - Companies Law

Anti-competitive agreements under Section 3 of the Competition Act, 2002 - contravention of the provisions of Section 3(1), 3(2), 4(2)(a)(ii) and 4(2)(c) of Competition Act, 2002 - abuse of dominant position under Section 4 of the Competition Act, 2002 - unfair trade practices and imposition of excessive interest rates - HELD THAT - The Commission perused the material available on record and information available in public domain. The Commission notes that the Informant is mainly aggrieved with the alleged unfair and discriminatory increase in the rate of interest charged by OP-1. The Informant has alleged that due to imposition of high rate of interest, frequent increase of rate of interest and not allowing pre-payment of Loans (imposition of pre-payment penalty) resulted in the creation of barriers for new entrants in the market, as consumers would be disinclined to switch to a new entrant due to the apprehension of incurring losses. It is also alleged that the competition gets adversely affected as consumers face hindrance in the form of penalties when they switch to another bank. Therefore, the conduct of OP-1 allegedly amounts to be in violation of Sections 3(1) and 3(2) of the Act. It is also alleged that imposing unjust and excessively high rates of interest contravene provisions of Section 4 of the Act. For the purpose of analysis of conduct of OP-1 under the ambit of Section 4 of the Act, the Commission deems appropriate in the present matter to delineate relevant market as provision of loan against property in India . The Commission notes that the Informant has suggested that OP-1 has the biggest share in the area of Delhi and NCR and therefore is dominant. The Commission also notes from the information available in public domain that OP-1 is a housing finance company which is India s third largest non-bank mortgage lender in the country and is regulated by the Reserve Bank of India (RBI) - it is observed from the information in public domain that the relevant market appears to be competitive with the presence of large number of banks and Non-Bank Financial Companies (NBFCs) and housing finance companies and thus, dominance of OP-1 is not established in the aforesaid relevant market. Further, the allegation of aftermarket abuse is misplaced since the loan services of the nature impugned herein do not involve any aftermarket as alleged by the Informant and is, thus, rejected. The Commission is of the view that there is no prima facie case made out under the provisions of Section 4 of the Act. As far as the provisions of Section 3 of the Act is concerned, the agreement with an end-consumer like in the present case is not envisaged as an anti-competitive agreement under Section 3 of the Act and therefore, no case is made out under the provisions of Section 3 of the Act. The Commission is of the view that prima facie there is no competition concern arising in the present matter under the provisions of Section 3 and Section 4 of the Act and therefore, the matter is directed to be closed forthwith under Section 26(2) of the Act - the Secretary is directed to communicate the decision of the Commission to the Informant, accordingly.

Issues Involved:
1. Allegations of anti-competitive agreements under Section 3 of the Competition Act, 2002.
2. Allegations of abuse of dominant position under Section 4 of the Competition Act, 2002.
3. Allegations of unfair trade practices and imposition of excessive interest rates.
4. Allegations of creating barriers for new entrants in the market.
5. Allegations of after-market abuse.

Issue-wise Detailed Analysis:

1. Allegations of Anti-Competitive Agreements under Section 3:
The Informant alleged that the agreement between the banks and consumers, which involved the imposition of higher interest rates and penalties for loan foreclosure, constituted anti-competitive actions. These actions were claimed to be void under Sections 3(1) and 3(2) of the Competition Act, 2002. The Informant argued that such practices stifled competition by discouraging consumers from switching to other financial institutions due to the penalties involved. However, the Commission observed that agreements with end-consumers, like in this case, do not fall under the ambit of anti-competitive agreements as envisaged under Section 3 of the Act. Therefore, no case was made out under these provisions.

2. Allegations of Abuse of Dominant Position under Section 4:
The Informant claimed that OP-1 abused its dominant position by unilaterally increasing interest rates without consent, thereby imposing unfair and discriminatory conditions. The Commission delineated the relevant market as the "provision of loan against property in India." It noted that OP-1, being the third largest non-bank mortgage lender in India, operates in a competitive market with numerous banks and NBFCs. Therefore, OP-1's dominance in the relevant market was not established. Consequently, there was no prima facie case of abuse of dominant position under Section 4 of the Act.

3. Allegations of Unfair Trade Practices and Imposition of Excessive Interest Rates:
The Informant alleged that OP-1 engaged in unfair trade practices by imposing excessively high interest rates, which were not justified by market conditions. The Informant highlighted discrepancies between the repo rate and the interest rates charged by OP-1, suggesting an unfair increase in rates. Despite these allegations, the Commission found no evidence to support the claim that OP-1's practices led to an appreciable adverse effect on competition. The Commission concluded that the allegations did not constitute a violation under the Competition Act.

4. Allegations of Creating Barriers for New Entrants:
The Informant argued that OP-1's practices created barriers for new entrants in the market by imposing pre-payment penalties and high interest rates, which discouraged consumers from switching to other lenders. This was claimed to stifle competition and innovation in the market. However, the Commission found that the market was competitive with the presence of various banks and financial institutions. It determined that the alleged barriers did not have a significant impact on market competition, and thus, no violation was established.

5. Allegations of After-Market Abuse:
The Informant alleged that OP-1 engaged in after-market abuse by altering loan terms and increasing interest rates post-agreement, exploiting its dominant position. The Commission rejected this claim, noting that the loan services in question did not involve any aftermarket as alleged. The Commission concluded that there was no prima facie case of aftermarket abuse.

Conclusion:
The Commission concluded that there was no prima facie case of anti-competitive behavior or abuse of dominant position by OP-1 under the provisions of Sections 3 and 4 of the Competition Act, 2002. Consequently, the matter was closed under Section 26(2) of the Act, and the Secretary was directed to communicate the decision to the Informant.

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