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Breaking exclusive: CCI makes first decision, clears bank loan charge ‘cartel’


The Competition Commission of India (CCI) has made it first order, clearing 16 banks from the allegation of having acted in a cartel to fix penalty rates of homeowners foreclosing housing loans.

The 170-page order was passed on 2 December 2010 by six CCI members, four of whom held that there was no violation of section 4 of the Competition Act.

"There is no bank/HFC in the market which can be deemed to be dominant by any of the parameters used for determining dominance. The question of abuse of dominance, therefore, does not arise," said the majority order.

Members PN Parashar and R Prasad dissented and found that the banks and home loan companies had contravened the provisions of various sub-sections of section 3 of the Competition Act.

According to the summary of the orders, both dissenting judges directed under section 27 for “the banks and [home loan companies] to stop all agreements with the customers relating to charging of prepayment of penalty or foreclosure fees etc. and not to enter into an agreement with the customers relating to such prepayment penalty/charges”.

The director general in his earlier report had also come to a different finding from the majority, having also found a violation of sections 3(3)(b) [agreements limiting or controlling provision of services] and section 19(3)(a), (c) and (d) [anti-competitive agreements].

Amarchand Mangaldas was representing one of the accused banks HDFC with a raft of other law firms also having bagged mandates advising the variety of banks under the CCI scanner.

Amarchand principal associate Naval Chopra commented: “I think this is a very important decision because it demonstrated that the Commission is both pro-consumer and pro-business and that business does not have to be scared of the Commission.”

“The Commission’s order is a well-reasoned order and has followed a thorough investigation,” he added. “The Commission is not afraid to take unpopular decisions which have the right founding in law.”

The Amarchand team also consisted of partner Pallavi Shroff, principal associate designate Shweta Shroff Chopra and senior associate designate Harman Singh Sandhu.

The petition was filed by advocate Shri Neeraj Malhotra in one of the Commission’s first cases numbered 5/2009.

The first cartel investigation filed with the CCI alleged Bollywood producers and distributors in July 2009, as first reported by Legally India.

The orders in the investigation Neeraj Malhotra vs Deutsche Post Bank Home Finance Ltd. & Ors is available here.

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