1. INTRODUCTION

1.1 On January 19, 2022, the Supreme Court of India ("SC") held that the definition of 'service' under the Competition Act, 2002 ("Competition Act") is expansive and enables the Competition Commission of India ("CCI") to conduct an inquiry into activities, such as, lottery related services, even if such activities are: (i) res extra commercium;1 and/ or (ii) regulated by other statute(s).2

2. BACKGROUND

2.1 The instant matter originated from a complaint filed by Tamarai Technologies Private Limited3 ("Tamarai") on May 16, 2012, with the CCI alleging that: (i) four bidders4 indulged in bid rigging in the tender floated on December 20, 2011, by the State of Mizoram ("the State") for the appointment of lottery distributors and selling agents for the state lottery, under the Lotteries (Regulation) Act, 1998 ("Regulation Act"); and (ii) the State abused its dominance by requiring distributors to furnish exorbitant sums of money towards security, advance payment, and prize pool from the distributors even before the lotteries were held.

2.2 The CCI inter alia observed that: (i) three of the bidders made identical bids of the minimum rate per draw for online lotteries; and (ii) only one bidder participated in the paper lottery segment as well as the bumper draw, who quoted the minimum rate for each segment, respectively. Hence, on June 07, 2012, the CCI held that there was prima facie evidence of cartelisation and bid rigging by the participating bidders and passed a prima facie order directing the Director General ("DG") to conduct an investigation into the matter. As such, the CCI found no prima facie case against the State as it could not be considered as an 'enterprise' or a 'group' under the Competition Act.5

2.3 On January 17, 2013, the DG submitted its investigation report to the CCI, concluding that all the four bidders indulged in cartelization and bid rigging, in violation of the Competition Act. In relation to the allegation against the State, the DG noted that they ought to have been more vigilant in stopping unfair trade practices and that their lapses6 raised suspicions of favoritism and collusion. Accordingly, on February 12, 2013, the CCI passed an order directing that the copies of the investigation report be sent to the parties, including the State, to enable them to file their objections/replies ("CCI Order").

2.4 Upon receiving the CCI Order, the State filed a writ petition7 before the Gauhati High Court, Aizwal Bench ("GHC") challenging the DG's investigation report and the CCI Order. On March 18, 2013, the GHC passed an interim order restraining the CCI from passing any final order ("Interim Order"). Thereafter, the CCI informed the GHC that it did not intend to pass an order against the State and prayed for the Interim Order to be set aside. In the meanwhile, two out of the four bidders8 also filed separate writ petitions before the GHC seeking quashing of the DG's investigation report and the CCI Order, on, inter alia, the ground that the CCI did not have the jurisdiction to conduct an inquiry in the instant matter as lotteries are not covered under the Competition Act. The GHC admitted all the three writ petitions together and continued the operation of the Interim Order.

2.5 On August 16, 2014, the GHC relied on a plethora of SC judgments9 and held that lotteries, being akin to gambling activities, come under the purview of the doctrine of res extra commercium. In relation to scope of activities covered by the Competition Act, the GHC held that it is applicable to legitimate trade and goods and was promulgated to ensure competition in markets that are res commercium. Thus, the GHC concluded that the CCI did not have jurisdiction in the instant case ("Impugned Judgment").10 Further, given that the CCI had found no contravention against the State, the GHC held that no further proceedings can be allowed against the State before the CCI. Aggrieved by the Impugned Judgment, the CCI preferred an appeal before the SC.

3. SC's FINDINGS

3.1 In relation to the scope of the CCI's jurisdiction over activities that are res extra commercium and/or regulated by other statutes, the SC observed that:

  1. Section 2(u) of the Competition Act defines 'service' in an expansive and inclusive manner as 'service of any description to be made available to potential users and includes ...' Accordingly, the purchaser of a lottery ticket is a potential user, and a 'service' is being made available by the selling agents in the context of the Competition Act.
  2. As such, the Competition Act, mandates the CCI to examine any perceived cartelization/ bid rigging in the tendering process of 'production, supply, distribution, storage, acquisition or control of goods or provision of services...' In the instant case, the CCI inquired into the potential bid rigging of the tendering process for appointment of selling agents and distributors for the lottery business in Mizoram, i.e., provision of a 'service'. Given that the CCI is not concerned with the carrying out, regulation or prohibition of the lottery business, which is governed by the Regulation Act, there is no conflict in the interplay of the two Acts that required reconciliation or prohibition against either one.
  3. Hence, even though lotteries may be: (a) a regulated commodity; and (b) considered as res extra commercium, the CCI has the power to inquire into its tendering process from competition law perspective.

3.2 Further, given that the CCI had prima facie opined and also stated before the GHC that it was not proceeding against the State, the matter against the State could have been put to rest. In view of the above, the SC set aside the Impugned Judgment.

4. INDUSLAW VIEW

4.1 Notably, the CCI has previously examined anti-competitive conduct in the lotteries business, wherein it observed that lottery is a 'service' under the Competition Act and explicitly held that it had the jurisdiction to inquire into such services.11 By way of the instant order, the SC has: (i) upheld the CCI's previous approach; (ii) explicitly clarified that the CCI's jurisdiction extends over res extra commercium activities;12 and, (iii) refrained from re-examining whether lottery, being akin to gambling, is res extra commercium.

Footnotes

1. The doctrine of res extra commercium holds that the right to carry on any business granted to all citizens under the Constitution of India, 1947, would not be available for activities that are inherently immoral or criminal, e.g., gambling, sale and manufacture of alcohol, lotteries, etc.

2. Competition Commission of India v. State of Mizoram & others, available at: https://main.sci.gov.in/supremecourt/2014/31973/31973_2014_36_1501_32612_Judgement_19-Jan-2022.pdf.

3. Tamarai, a lottery selling agent who was not eligible to participate in the said tender.

4. (i) Summit Online Trade Solutions Private Limited; (ii) NV International; (iii) Teesta Distributors; and (iv) E-Cool Gaming Solutions Private Limited.

5. The CCI observed that given the State's powers and functions under the Regulation Act, includes regulation and monitoring the business of lotteries. Hence, the State was empowered to impose financial, technical, and other conditions in their bid documents as it deemed fit, and the State cannot be considered as an enterprise.

6. Such as, (i) the bidding committee recommending the successful bidders to be appointed despite receiving the complaint from Tamarai; and (ii) the State calling the four bidders together for renegotiation of bid prices.

7. W.P. (C) No.24/2013.

8. (i) Summit Online Trade Solutions Private Limited; and (ii) NV International, filed W.P. (C) No.90/2013 and W.P. (C) No.76/2013, respectively.

9. (i) B.R. Enterprises v. U.P. and others, (1999) 9 SCC 700; (ii) State of Bombay v. R.M.D. Chamarbaugwala, AIR 1957 SC 699; (iii) Sunrise Associates v. Govt. of NCT of Delhi and Ors., (2006) 5 SCC 603; and (iv) Union of India and Ors. V. Martin Lottery Agencies Limited, (2009) 12 SCC 209.

10. Impugned Judgment, available at: https://ghcazlbench.nic.in/Judgment/W.P.(C)%20No.%2024%20of%202013%20.pdf.

11. Case No. 15 of 2010, Jupiter Gaming Solutions Private Limited v. Government of Goa and others, available at: https://www.cci.gov.in/sites/default/files/JupiterOrderMain240511_0.pdf, para 17.

12. Case No. 02 of 2016, International Spirits and Wines Association of India v. Uttarakhand Agricultural Produce Marketing Board and others, available at: https://www.cci.gov.in/sites/default/files/02-of-2016.pdf; and, Case No. 53 of 2017, Starlight Bruchem Limited v. Flora and Fauna Housing & Land and others, available at: https://www.cci.gov.in/sites/default/files/53-of-2017_0.pdf.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.