Why is this important
Fines for criticism violate the constitutional right to freedom of speech and appeal to state bodies. Developers use such points to intimidate clients and suppress negative feedback. The committee’s decision creates a precedent: clients can appeal similar conditions from other developers. This strengthens the protection of consumer rights in the construction market, where developers often abuse their dominant position.
What happened
- Golden House fined clients 10% for contract termination or public criticism;
- The Competition Committee ordered the cancellation of the illegal clause;
- Basis: Articles 4, 6, 21, 23 of the Law on Protection of Consumer Rights;
- Citizens have the right to appeal to the media, courts, and state bodies without sanctions;
- In September, the committee warned developers about the illegality of such fines.
The essence of the violation
Golden House included a clause in the contracts stating that if the client terminates the contract or appeals to the media, court, government agencies with criticism of the company, the developer will withhold up to 10% of the apartment’s value allegedly due to “damaging business reputation”.
For example, a client bought an apartment for 1 billion soums. After a year, he decided to terminate the contract due to the delay in delivery. Golden House withheld 100 million soums (10%). If the client complained to the media or the Competition Committee, the company could withhold another 100 million for “bad reputation”.
Competition Committee’s Position
The regulatory body ordered Golden House to voluntarily eliminate violations, citing the consumer protection law:
- Article 4: The right of consumers to freely choose goods and services.
- Article 6: Requirement for proper quality of goods and services.
- Article 21: It is prohibited to include in the contract terms that infringe upon the rights of consumers, or to charge for services not rendered. If the consumer suffers losses, the seller is obligated to compensate for them.
- Article 23: The right of consumers to apply to the court and state bodies for the protection of their rights.
The committee also referred to Article 9 of the law on guarantees of freedom of entrepreneurial activity: the actions of companies must comply with the legislation on competition and consumer protection.
Warning in September
At the end of September, the Competition Committee warned developers about the illegality of fines for terminating contracts. The supervisory authority stated that terminating the contract does not cause real damage to the developer, therefore the fine is illegal.
Context
Golden House Property Group is one of the largest developers in Uzbekistan, selling residential complexes in Tashkent and the regions. The company has repeatedly faced scandals due to delays in the delivery of facilities, poor construction quality, and the imposition of additional services.
The problem of fines for criticism: developers include dramatic clauses in contracts, intimidating clients and suppressing negative reviews. This violates the constitutional right to freedom of speech and appeal to state bodies.
Why it worked: most clients don’t know their rights or are afraid to sue large companies. Builders use the inequality of positions: the person has already contributed money, and the developer keeps it under any pretext.
Precedent: Competition Committee decision creates a precedent. Clients of other developers with similar clauses in contracts can appeal them citing this case.
Real damage: The Committee rightly noted that the termination of the contract does not cause real damage to the developer. Apartments are quickly resold due to housing shortages, and the developer profits from the new client. A fine is illegal enrichment.
Public criticism: banning criticism in the media and government agencies is a gross violation of constitutional rights. Citizens have the right to protect their interests through publicity, complaints, and courts.
Other developers: Golden House is not the only company with such a practice. Many developers include similar clauses in their contracts. The committee’s decision should be a signal for the entire industry.
Furthermore, if Golden House fails to comply with the order voluntarily, the Competition Committee can impose fines, suspend operations, or take the case to court.
