Competition Commission Can Probe Anti-Competitive Aspects Of Res Extra Commercium Businesses Like Lottery : Supreme Court

On Wednesday, the Supreme Court held that even though lottery is a regulated commodity under the Regulation Act, anti-competitive elements in business related to lotteries would continue to be governed by the Competition Act, 2002. The Apex Court further held that there was no bar on the Competition Commission of India to investigate anti-competitive practices like bid rigging, collusive bidding and cartelisation in the tendering process for lottery business, which is in the nature res extra commercium. A bench comprising Justices Sanjay Kishan Kaul and M.M. Sundresh allowed an appeal assailing the order of the Gauahati High Court, which had set aside the preliminary order of the Competition Commission of India ("CCI") and the report of the Director General, primarily, on the ground that CCI had no jurisdiction to inquire into allegations of bid rigging, collusive bidding, and cartelisation in the tender process for appointment of selling agents and distributors for lotteries organised by State. Factual Background On 20.12.2011, the Government of Mizoram issued an Invitation for Expression of Interest ("EoI") through the Director of Institutional Finance and State Lottery inviting bids to appoint lottery distributors and selling agents for State lotteries, which are organised in terms of Mizoram Lotteries (Regulation) Rules, 2011 framed under the Lotteries (Regulation) Act, 1998. As per the EoI, the minimum rate fixed was Rs. 5 lakh per draw for Bumper draw and Rs. 10,000 per draw for others. The successful bidders were supposed to organise, promote, conduct and market the lottery through paper as well as online. The selected distributors/settlers were required to furnish security of Rs. 5 crore each for the lottery, Rs 1 crore as advance payment for sale proceeds and another Rs. 1 crore for the prize pool. The Mizoram Government selected four companies/partnership businesses. Thereafter on 16.05.2012, a complaint was made to the Competition Commission of India ("CCI") under Section 3 and 4 read with Section 19(1)(a) of the Competition Act ("Act") seeking investigation in respect of the State Lottery run by the Government of Mizoram. In exercise of powers under Section 26(1) of the Act, CCI took a view that prima facie there was evidence of cartelisation and bid rigging as - Three bidders made identical bid of minimum rate for online lotteries;Only one party made a bid for paper lottery and that too at the minimum rate;Only one party made a bid for the bumper draw and that too at the minimum rate. The CCI opined that on first blush the successful bidders had acted in violation of Section 3(1) read with Section 3(3) of the Act, but no prima facie case was made out against the State and the allegation of abuse of dominant position exercised by the State was rejected. By order dated 07.06.2012 direction was given to the Director General ("DG") to investigate the matter, who eventually concluded that the successful bidders had colluded, formed a cartel and indulged in bid rigging and passed adverse remarks on the conduct of the State Government and its officer. On 12.02.2013, the report of the DG was forwarded by the CCI to the successful bidders and also the State seeking their response. The State of Mizoram filed a writ petition before the Guwahati High Court challenging the report of ("DG") and the fact that the report was forwarded to the State even when the allegation of abuse of dominant power against it was dropped. The High Court granted interim relief directing CCI not to pass final orders. Subsequently, writ petitions were filed by two successful bidders seeking quashing of the DG's report and the proceedings before the CCI. The three petitions were taken up together and the CCI was restrained from passing final orders. Eventually, the High Court set aside the report of the DG and the CCI orders dated 07.06.2012 and 12.02.2013 on the finding that the lottery business being gambling and falling within the purview of doctrine of res extra commercium would not fall within the purview of the Competition Act. Contentions raised by appellant Senior Advocate, Mr. Rajshekar Rao appearing on behalf of CCI argued that CCI was not concerned with the regulation of prohibition of lottery business but only about the possibility of bid rigging in the tender process. It was clarified that as there is no overlap between the Competition Act and the Regulation Act, there is no bar on CCI in considering the particulars of the tender process, which might have anti-competitive elements under the scope of Sections 3(1) and 3(3) of the Competition Act. Reference was made to CCI v. Bharti Airtel , wherein after scrutinising the contours of Telecom Regulatory Authority of India Act, 1997 and the Competition Act, the Apex Court held that the two were distinct in function and determination of cartel or collusion would fall within the ...

Competition Commission Can Probe Anti-Competitive Aspects Of Res Extra Commercium Businesses Like Lottery : Supreme Court

Sohini Chowdhury

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Competition Commission Can Probe Anti-Competitive Aspects Of Res Extra Commercium Businesses Like Lottery : Supreme Court

Sohini Chowdhury

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