The Competition Commission of Pakistan (CCP) has observed that the degree of regulation in real estate market remains inadequate to the extent that bogus housing schemes and deceptive marketing practices continue to harm growth in real estate sector, ultimately causing a loss to the overall sustainability of national economy.
These observations against real estate developers have been made by the CCP while imposing a penalty of Rs 2,500,000 on a real estate project of Islamabad, through a latest order issued by the commission. The two-member bench of the CCP headed by its Chairperson Vadiyya Khalil has issued the order against the real estate developer.
The interesting part of the order is that it has also elaborated the techniques used by real estate developers who use ambiguous information in their advertising campaigns without being able to back their claim with evidence and indulge in deceptive marketing practices and misleading investors.
According to a new order issued by the CCP, in recent times, the Commission has become wary of the prevalent practice of deceptive marketing and misleading advertisement specifically in the real estate industry and how such conduct is perceived by consumers in terms of their transactional decision to their own financial detriment. Real estate developers are increasingly leading potential investors to a wrong conclusion or false impression, through the use of ambiguous information in their advertising campaigns without being able to back their claim with evidence. Such conduct will almost always be culpable under Section 10 of the Act. Special care must be taken by not making a false or misleading statement, whether expressed or implied claim, absolute or qualified, in the electronic or print media or otherwise, relating to pertinent information such as government approvals and no-objection certificates (NOCs), nature, characteristics and use to which the land may lawfully be put, existence of associated facilities and amenities, price and additional charges, as well as the location of the land itself.
The CCP stated that the importance of responsible and accurate advertising in relation to real estate should not, in any circumstance, be undermined. The real estate market plays a very vital role in the development of any country's economy as a number of other associated sectors have close links with this sector. At the same time, the degree of regulation remains inadequate to the extent that bogus housing schemes and deceptive marketing practices continue to harm growth in this sector, ultimately causing a loss to the overall sustainability of Pakistan's economy. The Commission, at the outset, also bears in mind the specific circumstances of consumers that often fall victim to misleading claims in relation to real estate investments they may make. For the majority of the population in this country, it almost takes a lifetime of savings or obtaining credit or loans from banks to make an investment such as the acquisition of a plot to secure a more stable future. Such a transactional decision is a much more complicated and difficult one as against buying a household or shelved product from a supermarket.
The CCP order said that the order shall dispose of the proceedings initiated pursuant to show cause notice (SCN) No 21/2016, dated 13 June 2016, issued to a real estate developer project (respondent) for prima facie violations of Section 10 of the Competition Act, 20 I 0 (Act).The SCN was issued pursuant to an enquiry report dated 11 June 2016 initiated by the Competition Commission of Pakistan in the exercise of its suo motu powers under Section 37(1) of the Competition Act.
The main issue under consideration in this matter is whether the respondent's marketing claims as contained in its advertisements for its housing project of Islamabad amount to deceptive marketing practices through the distribution of false or misleading information to consumers and/or capable of harming the business interests of competitors, within the meaning and scope of Section 10(1) read with Section 10(2)(a) and 10(2)(b) of the Act.
Keeping this in view, the Commission is of the considered view that the contravention of Section 10(1) of the Act stands established in terms of what has already been discussed. At the same time, the Commission accepts the commitments of the respondent as contained in its undertaking dated 27 October 2017 in view of the willingness of the respondent to act in accordance with the directions of the Commission and the provision of the Act. Nonetheless, in the given facts and circumstances and in pursuance of regulation 37 of the Competition Commission (General Enforcement) Regulations, 2007 read with Section 38 of the Act, the Commission is constrained to impose a penalty in the sum of Rs 2,500,000 on the undertaking.
The Commission further directs the respondent to ensure that it does not make use of the word "Islamabad" as part of the name of its housing scheme and that the unauthorized affiliation logos are not displayed on its website or any promotional material in the future. The respondent is also directed to refrain from indulging in any form of deceptive marketing practices in the future and is forewarned that repeat of violations may attract stricter penalties as per the law. Further, the penalty so imposed on the respondent shall be deposited with the registrar of the Commission within thirty days from the date of this order, the CCP order added.
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