Tie-in Agreements Between Enterprises And End-Consumer Not Covered U/s 3(4) Of Competition Act, CCI Closes Information Against Covai Centre, Ozone Developers

The CCI held that Ozone did not occupy a dominant position in the relevant market due to the presence of numerous other real estate developers offering similar services targeting senior citizens. Further, the tie-in arrangement entered by the Informant by making Covai Service its service provider was held to be outside of the scope of Section 3(4) of the Competition Act.

Brief Facts:

Mr. Buchi Ramarao Valury ("Informant") filed an information with the Competition Commission of India (“CCI”) against 3 entities, namely Covai Property Centre (“Covai”), Covai Senior Citizen Services (“Covai Services”) and Ozone Urbana Infra Developers (“Ozone”). The allegations pertained to the contravention of Section 3 (anti-competitive agreements) and Section 4 (abuse of dominance) of the Competition Act, 2002.

The Informant purchased a flat in 'Urbana Irene' apartment developed by Ozone. Ozone had a tie-in arrangement with Covai, a consultancy and care services provider for retirement communities. Due to the tie-in arrangement, the Informant was compelled to accept catering and housekeeping services from Covai Services (a subsidiary of Covai).

The Informant claimed a lack of choice in selecting service providers due to contractual clauses mandating agreements with Covai Services and timely payment of maintenance charges determined by Covai or its nominees. Further, the Informant alleged that Covai Services abused its dominant position by making unilateral changes in housekeeping staff and monthly maintenance charges, purportedly without validation. The Informant further asserted coercion into signing separate service agreements with Covai and Covai Services, with opaque financial practices and lack of participative management as promised. Lastly, it was alleged that Covai services unilaterally occupied the common amenities and areas, which should have ideally been the property of the association. The decision-making also rested with Covai Services, instead of the residents.

Observations by the Commission:

The CCI observed that Ozone, being the absolute owner of Urbana Irene, had engaged Covai for various purposes, including design, development, and provision of services aimed at catering to senior citizens. Covai Services, in turn, had been authorized to undertake these tasks. The primary grievance expressed by the Informant pertained to the imposition of catering and housekeeping services provided by Covai Services, as stipulated in the agreements entered into on July 10, 2018. The Informant also expressed dissatisfaction with unilateral changes in housekeeping staff allotment and an increase in Maintenance Management Charges (“MMC”), attributing these alterations to alleged anti-competitive behaviour on the part of Covai, Covai Services and Ozone (“Opposite Parties”).

The CCI clarified that for a comprehensive analysis under Section 4 of the Act, it is crucial to establish whether the Opposite Parties qualify as 'enterprises.' Given their engagement in commercial activities, they unequivocally fell within the ambit of 'enterprise' as defined by Section 2(h) of the Competition Act. Subsequently, the CCI delineated an appropriate relevant market, comprising both product and geographic dimensions.

The CCI recognized that apartments tailored to meet the requirements of senior citizens constitute a distinct product category, characterized by amenities essential for this demographic. Thus, the relevant product market was defined as 'the market for provision of services for development and sale of apartments to cater to the needs of senior citizens.' Regarding the relevant geographic market, the CCI considered the location of the project in Kannamangala, Taluka-Devanahalli, Bengaluru, and Karnataka. This location fell within the Bangalore Metropolitan Region, distinguished by various factors influencing competition.

Considering the competitive landscape within the Bangalore Metropolitan Region, the CCI acknowledged the presence of numerous real estate developers offering similar services targeting senior citizens. This competitive environment mitigated the likelihood of Ozone holding a dominant position, thus precluding the need for further examination of alleged abusive conduct.

Additionally, the CCI addressed the allegation of a tie-in arrangement forced upon the Informant by making Covai Service a service provider for Urbana Irene allottees. However, it concluded that such agreements between an enterprise and an end consumer do not fall within the purview of Section 3(4) of the Competition Act.

In light of the foregoing analysis, the CCI found no prima facie case warranting further action and directed the closure of the filed Information under Section 26(2) of the Competition Act.

Case Title: Buchi Ramarao Valury vs Covai Property Centre (India) Private Limited and Ors.

Case No.: Case No. 30 of 2023