Tie-In Arrangements Between Care Services Provider And Consumer Not covered Under Sec 3(4) Of Competition Act: CCI

Tie-In Arrangements Between Care Services Provider And Consumer Not covered Under Sec 3(4) Of Competition Act: CCI

States that tie-up agreements between the enterprise and the end consumer did not come under the Competition Act

The Competition Commission of India (CCI) has closed the complaint filed against Covai Property Centre, its subsidiary Covai Senior Citizen Services and Ozone Urbana Infra Developers on allegations of abuse of dominance and anti-competitive agreements under Section 4 and 3 of the Competition Act, 2002.

The bench comprising Ravneet Kaur (Chairperson), Anil Agrawal (Member), Sweta Kakkad (Member) and Deepak Anurag (Member) held that Ozone did not occupy a dominant position in the market due to the presence of numerous real estate developers offering similar services. Also, the arrangement entered by the informant by making Covai its service provider was outside the purview of Section 3(4).

Buchi Ramarao Valury (informant) purchased a flat in 'Urbana Irene' apartment developed by Ozone, which had a tie-in with Covai, a consultancy and care services provider for retirement communities. The informant was thus compelled to accept catering and housekeeping services from Covai Services, a Covai subsidiary.

The informant stated a lack of choice in choosing service providers due to contractual clauses mandating agreements with Covai Services and maintenance charges determined by Covai and its nominees. He alleged that Covai Services abused its dominant position by making unilateral changes in housekeeping staff and monthly maintenance charges, without validation.

The complainant alleged being coerced into signing separate service agreements with Covai and Covai Services that unilaterally occupied the common amenities and areas, which should have ideally been the property of the resident’s association. Moreover, the decision-making powers rested with Covai Services and not the dwellers,

The CCI observed that being the absolute owner of Urbana Irene, Ozone engaged Covai for various purposes, including design, development, and provision of services for senior citizens. In turn, Covai Services was authorized to undertake these tasks.

The informant’s pertinent grievance was the imposition of catering and housekeeping services provided by Covai Services as stipulated in the 10 July 2018 agreement. He was dissatisfied with changes in the housekeeping staff and the increase in Maintenance Management Charges, attributing these to the alleged anti-competitive behavior of the three entities.

The bench clarified that for a comprehensive analysis under Section 4, it was important to establish whether the opposite parties qualified as 'enterprises.' Since they dealt in commercial activities, automatically they came under the purview of 'enterprise' as defined in Section 2(h) of the Competition Act. The CCI also explained the relevant market, comprising product and geographic dimensions.

The Commission noted that the apartments tailored for senior citizens constituted a distinct product category, characterized by amenities essential for this demographic. Therefore, 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.'

As for the geographic market, the CCI considered that the Kannamangala, Taluka-Devanahalli, Bengaluru, Karnataka location fell within the Bangalore Metropolitan Region, distinguished by various factors influencing competition.

Thus, the CCI acknowledged the presence of numerous real estate developers offering similar services for senior citizens in the vicinity. The competition mitigated the likelihood of Ozone holding a dominant position, leading to abuse of power.

Regarding the tie-in arrangement forced upon the informant by making Covai Service a service provider, the bench stated that agreements between an enterprise and an end-consumer did not fall under Section 3(4). Thus, the CCI found no prima facie case warranting further action and directed closure of the matter.