Competition Commission dismissed an information alleging abuse of dominant position by the Government of Goa in a lottery tender and bid manipulation. The Commission held that lottery services fall under the Act, the tender conditions were non-arbitrary, and there was no collusive bidding.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
COMPETITION COMMISSION OF INDIA
Case No.15 of 2010
Date: May 12, 2011
Jupiter Gaming Solutions Private Limited Informant
v.
Government of Goa & Anr.
Opposite Parties
O R D E R
The present information has been filed under section 19 of the Competition Act, 2002 (‘the Act’) on 05.04.2010 by M/s Jupiter Gaming Solutions Private Limited (‘the informant’) against the Government of Goa (‘the opposite party No.1’) and M/s Martin Lottery Agency Limited (‘the opposite party No.2’) alleging, inter alia , abuse of dominant position by the opposite party No.1 in formulating the pre-qualification terms and conditions of the lottery tender floated on 11.03.2010 whereby expressions of interest were invited for Goa Brand Lottery Schemes (Online and Paper Lotteries) (‘the Lottery Tender’).
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2.2 The informant has stated that the failure to meet one or more of the prequalification terms and conditions of the Lottery Tender would render the proposal of a participating entity liable to be rejected. As per the information, the last date for purchase of proposal form for the Lottery Tender was 25.03.2010, the last date for submission of the proposal was 05.04.2010 and the evaluation was fixed for 08.04.2010.
2.4 It is further alleged that the entry barrier in terms of the high capital cost of entry had been designed to benefit the opposite party No.2 and to the detriment and prejudice of smaller entities including the informant who otherwise fulfilled all other conditions of the Lottery Tender and had been successfully providing the marketing and support services to the various State Governments for the past several years. Furthermore, it has been alleged that the opposite party No.1 has abused its dominant position by imposing unfair and discriminatory conditions in the Lottery Tender, which in turn have limited/ denied market access to all other entities involved in providing similar services including the informant.
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2.5 The informant has, inter alia, prayed for deletion of the pre-condition requiring the participating entity to have had a minimum gross turnover of Rs. 4000 crore per annum during the last three financial years from the Lottery Tender.
4.1 The report of the DG concludes that the opposite party No.1 has abused its dominant position in violation of the provisions of section 4(2)(c) of the Act as it deprived the smaller parties from participating in the Lottery Tender. As per the report of the DG, the inclusion of the term requiring a high turnover of Rs. 4000 crore as a pre-qualification condition of the Lottery Tender denied market access to the other players in the relevant market. Therefore, as per the report of the DG, the opposite party No.1, in formulating and designing the terms of the Lottery Tender had abused its dominant position.
4.2 The report of the DG also discusses facts relating to the bidding process in the present case and concludes that there is circumstantial evidence to suggest that there has been a bid manipulation in the form of complementary bidding or cover bidding by the opposite party No.2 and Sugal & Damani in contravention of the provisions of section 3(3)(d) of the Act.
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As per the observations made by the DG in the report, the opposite parties were not able to provide any satisfactory explanation on these facts.
4.4 The report of the DG further states that owing to the tacit understanding between opposite party No.2 and Sugal & Damani, the former submitted a defective bid which resulted in rejection of the same and consequently the tender was awarded to Sugal & Damani. This, as per the report of the DG, caused a loss to the opposite party No.1. According to the report of the DG, if two parties were awarded the contract, the opposite party No.1 would have got a revenue of Rs. 24 crore (approx.). However, as per report of the DG, the opposite party No.2 intentionally and deliberately filed a defective bid with an extra condition inserted in ink to facilitate awarding of the tender to Sugal & Damani. Consequently, the opposite party No.1 awarded the contract to one operator only and, the net revenue in this case, as per the DG report, would be Rs.14.5 crore (approx.).
4.5 in view of the aforesaid observations, the DG has concluded that the acts of the opposite party No.1 amount to an abuse of dominant position in contravention of the provisions of section 4(2)(c) of the Act and the opposite party No.2 along with Sugal & Damani have manipulated the bidding process in contravention of the provisions of section 3(3) of the Act.
5.1 The opposite party No.1 has argued that the findings of the DG are not correct and are based on mis-appreciation of the entire factual situation relating to the tender process adopted by it. The opposite party No.1 has contended that the adverse findings of the DG cannot be sustained in law or otherwise.
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5.2 It was further submitted that the DG failed to take into consideration the motive of the informant for initiating these proceedings as, in fact, it had not even purchased the bid form and therefore had no reason to feel aggrieved. The opposite party No.1 has further argued that the matter had become infructuous as the information was sought to be withdrawn by the informant on 11.05.2010.
5.3 The opposite party No.1 in its reply to the report of the DG has submitted that the lotteries are to be marketed or operated as per the Lotteries (Regulation) Act, 1998 (‘the Lotteries Act’) and the rules made thereunder. The opposite party No.1 explained in detail the process adopted by it in the Lottery Tender.and stated that the interested parties were required to submit their proposals along with the requisite EMD and other relevant documents as specified.
5.4 The opposite party No.1 has submitted that the conditions of the Lottery Tender including the following had been designed as per the market conditions:
5.5 As per the opposite party No.1, it had notified that an interested party may purchase the proposal form along with terms and conditions from the office of the Joint Secretary, Finance Department by making a payment of Rs.25,000.
5.6 It has been averred that in response to the Lottery Tender, nine parties had purchased the proposal form from the opposite party No.1 and only two parties submitted their proposals for appointment as marketing agent viz ., Future Gaming
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Solutions Pvt. Ltd. (earlier known as M/s Martin Lottery Agency Limited) i.e., the opposite party No.2 and Sugal & Damani.
5.7 As per the opposite party No.1, a participating entity had to offer a net guaranteed revenue of Rs. 12 crore per annum on a turnover of Rs.1000 crore. Further, for an additional turnover of over and above 1000 crore, the participating entity was required to pay 0.25% of the total additional turnover. Accordingly, only such entities which could inter alia guarantee to pay revenue of Rs.12 crore per annum would be eligible to operate and market all kinds of Goa brand lotteries. The opposite party No.1 has argued that the above indicates that it was willing to appoint one or more marketing agent, if the requisite terms and conditions, as mentioned in the Lottery Tender, were fulfilled.
5.8 The opposite party No.1 has also stated that M/s Pooja Fortune Pvt. Ltd had filed a writ petition viz ., Writ Petition (Civil) No.265/2010 before the Hon’ble High Court of Bombay at Goa praying for setting aside/ quashing the Lottery Tender issued by the opposite party No.1 for appointment of marketing agent/ distributor. It was contended in the writ petition that the said expression of interest was framed to favour two parties, viz ., Playwing and SNJ & Company and the petitioner was prevented from participating in the tender process. It was also contended that the Lottery Tender was unreasonable as it contained arbitrary conditions having no relevance to the object and scope of the Lotteries Act.
5.9 It is also pertinent to mention that the opposite party No.1 filed an affidavit before the Hon’ble High Court of Bombay at Goa in the said case, stating that Playwing and SJN Company had not purchased the proposal form, and therefore, no question of favoritism arises. It was also stated that the proposals submitted by the opposite party No.2 and Sugal & Damani were opened and scrutinized on 08.04.2010, and were subject to satisfying and qualifying criteria.
5.10 It was further stated that the Hon’ble High Court of Bombay at Goa vide its order dated 13.04.2010 dismissed the abovesaid writ petition holding the terms and conditions in the expression of interest as bonafide and legitimate which ensured that only serious and eligible bidders could participate in the bid process. It was further
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stated by the opposite party No.1 that the Court in the case also noted that the requirement to have a minimum of Rs. 4000 crores as gross turnover during the last three financial years was obviously to ensure that the participants would be in a position to raise a turnover of Rs.1000 crore and held that it was well within the opposite party No.1’s right to include the above term as a pre-condition of the Lottery Tender.
5.11 It was further stated that the evaluation of the bid was done on 01.06.2010. Sealed proposals were opened in the presence of the parties in the Chamber of the Secretary-Finance, Government of Goa. It has been further submitted that with respect to the proposal received from the opposite party No.2, the evaluation committee had observed that the opposite party No.2 had failed to provide the requisite no-dues certificate from the State of Maharashtra. The opposite party No.1 has further stated that the opposite party No.2’s proposal was also not as per the terms of the Lottery Tender which, inter alia, required the participating entity to accept the condition of guaranteeing Rs.12 crore per annum for a turnover of Rs.1000 crore and 0.25% of the total additional turnover for a turnover over and above Rs.1000 crore. In view of the above, the opposite party No.1 has submitted that the proposal of the opposite party No.2 was not accepted. It is further submitted that Sugal & Damani was appointed as a market agent and agreement was signed on 06.05.2010.
5.12 The opposite party No.1 has argued that the DG has failed to obtain the relevant information from the other State Governments which also run various lottery schemes as well as tenders for the online lottery schemes as per the market conditions.
5.13 It has been stated that there is no abuse of dominant position by the Government of Goa. The opposite party No.1 has also argued that the agreement entered into with Sugal & Damani for marketing of online lotteries as well as paper lotteries is not in contravention of the provisions of the Act. The opposite party No.1 has submitted that it has not adopted any unfair or discriminatory condition while appointing the marketing agent.
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5.14 It is further argued that the DG has failed to take into consideration the order dated 13.04.2010 passed by the High Court of Bombay at Goa in Writ Petition (Civil) No.265 of 2010 as discussed above. The opposite party No.1 has also contended that the DG has failed to produce any document/ evidence to establish that the opposite party No.1 had abused its dominant position by designing bid document in any manner to deprive the legitimate parties to participate in the tender process and the findings/ observations of the DG are based on conjectures and surmises.
5.15 The opposite party No.1 has also submitted that the DG has failed to produce any document/ evidence to show that there is any cover bidding or complementary bidding in any form by any party, particularly to substantiate the alleged understanding between Sugal & Damani and the opposite party No.2.
5.16 In view of the above, the opposite party No.1 has prayed to the Commission to close the enquiry in the present matter.
6.1 The opposite party No.2 has contended that under section 26(1) of the Act, the Commission is required to arrive at a finding that a prima facie case exists in the light of the information and only upon finding the existence of a prima facie case, the Commission can direct the DG to investigate into the matter. In support of its arguments, the opposite party No.1 has cited the decision of the Hon’ble Supreme Court of India in Competition Commission of India v . Steel Authority of India Ltd. , Civil Appeal No.7779 of 2010, where it was held that while forming an opinion under section 26(1) of the Act, reasons are to be provided by the Commission for the same.
6.2 It was further submitted that power to determine the relevant market under the Act lies only with the Commission. In view of the provisions contained in sections 19(5), 19(6) & 19(7) read with sections 2(r), 2(s) and 2(t) of the Act, contraventions of
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sections 3 and 4 of the Act may be found only by the Commission. It has been submitted that the DG has been empowered under section 41 of the Act to assist the Commission only in investigating into any contravention of the provisions of the Act and does not possess the power to determine the relevant market under the Act.
6.3 It is also urged that in order to inquire into any alleged contravention of the provisions contained in section 3 & 4 of the Act, it would be imperative to determine whether the said activity comes within the purview of the Act. It is stated that on perusal of both sections 3 and 4 of the Act, such activity should be with respect to or in relation to goods or services. It has been argued by the opposite party No.2 that lottery is neither a good nor a service and hence the present matter is beyond the purview of the Act.
6.4 It has been argued that the activity in question in the present case relates to appointment of the distribution/ marketing agents of the lotteries organized and promoted by the State of Goa. It has been submitted that such an activity is a sovereign function performed by the department of the State Government. Floating of tenders for appointment of agents is an inalienable activitiy that can only be performed by the State Government as under the Lotteries Act only the State Government is empowered and authorized to organize, conduct or promote a lottery.
6.5 Thus, referring to the definition of enterprise given in section 2 (h) of the Act, the opposite party No.2 has argued that the activity in question relates to the sovereign function of the opposite party No.1 and hence the Commission does not have jurisdiction to enquire into the present matter.
6.6 The opposite party No.2 has argued that the facts as alleged in the information are not sustainable against it. It is argued that the DG in his report has made certain remarks against the answering opposite party while investigating contravention of section 3 of the Act. It was argued that as the prima facie opinion was formed for alleged contravention of section 4 of the Act and the opposite party No.2 has participated in the investigation qua the same. Thus, if a contravention of section 3 of the Act was established, the answering opposite party ought to have been given an opportunity to place its submissions to controvert the same.
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Point No.I: Whether the Commission has jurisdiction on the subject matter, i.e., the lottery services in the present matter
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‘service’ means service of any description which is made available to potential users and includes the provision of services in connection with business of any industrial or commercial matters such as banking, communication, education, financing, insurance, chit funds, real estate, transport, storage, material treatment, processing, supply of electrical or other energy, boarding, lodging, entertainment, amusement, construction, repair, conveying of news or information and advertising;
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In Black's Law Dictionary the word _ **_any_** _' has been explained as having a diversity of meaning' and may be "employed to indicate all and every as well as some or one and its meaning in a given statute depends upon the context and subject matter of statute.
The word ‘include’ is very generally used in interpretation clauses in order to enlarge the meaning of words or phrases occurring in the body of the statute; and when it is so used these words or phrases must be construed as comprehending, not only such things as they signify according to their natural import, but also those things which the interpretation clause declares that they shall include. But the word ‘include’ is susceptible of another construction, which may become imperative, if the context of the Act is sufficient to show that it was not merely employed for the purpose of adding to the natural significance of the words or expressions defined. It may be equivalent to "mean and include", and in that case it may afford an exhaustive explanation of the meaning which, for the purposes of the Act, must invariably be attached to these words or expressions.
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Point No.II. Whether the activity of appointing agents for distribution and marketing of lotteries is a sovereign function.
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exclusion of everyone else under the Lotteries Act and therefore, the activity in question is relatable to the sovereign function of the Government of Goa and hence the Department of the State Government of Goa is outside the scope of the term enterprise under the present investigation and hence no investigation can be initiated in relation to the same.
“enterprise” means a person or a department of the Government, who or which is, or has been, engaged in any activity, relating to the production, storage, supply, distribution, acquisition or control of articles or goods, or the provision of services, of any kind, or in investment, or in the business of acquiring, holding, underwriting or dealing with shares, debentures or other securities of any other body, corporate, either directly or through one or more of its units or divisions or subsidiaries, whether such unit or division or subsidiary is located at the same place where the enterprise is located or at a different place or at different places, but does not include any activity of the Government relatable to the sovereign functions of the Government including all activities carried on by the departments of the Central Government dealing with atomic energy, currency, defence and space.”
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Point No.III: Whether the opposite party No.1 has contravened the provisions of section 4 of the Act.
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terms and conditions for appointment of distributors or selling agents. Thus, the decision to engage operators in the lottery business rests with the State government. As per the provisions of the Lotteries Act and the rules made thereunder since no person is authorized to undertake this activity in market without the approval of the State government and accordingly, the State government by virtue of its statutory powers to decide the entities who operate in the lottery market, enjoys a position of strength in this market.
Explanation.—For the purposes of this section, the expression—
(a) "dominant position" means a position of strength, enjoyed by an enterprise, in the relevant market, in India, which enables it to—
(i) operate independently of competitive forces prevailing in the relevant market; or
(ii) affect its competitors or consumers or the relevant market in its favour.
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during the last three financial years which was designed to favour the opposite party No.2.
“5. ….[T]he respondents are well within their rights to require a participant to have a minimum gross turnover of Rs.4000 crores, per annum, during the last three financial years. This is obviously to ensure, as far as possible, that the participant would be in a position to raise revenue per annum upto a turnover of Rs.1000 crores. The
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manner in which the same is to be ensured must be left to the decision of the respondents.
6. The contention that a participant is required to pay only Rs. 12 crores is also not well founded, as the proforma letter itself indicates that a participant is bound to pay 0.25%in respect of the turnover, over and above Rs.1000 crores, per annum.”
‘… [T]he government must have a free hand in setting the terms of the tender. It must have reasonable play in its joints as a necessary concomitant for an administrative body in an administrative sphere. The courts would interfere with the administrative policy decision only if it is arbitrary, discriminatory, malafide or actuated by bias. It is entitled to pragmatic adjustments which may be called for by the particular circumstances. The courts cannot strike down the terms of the tender prescribed by the government because it feels that some other terms in the tender would have been fair, wiser or logical. The courts can interfere only if the policy decision is arbitrary, discriminatory or mala fide.’
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cannot be considered to be an arbitrary power. It was further held that if the said power is exercised for any collateral purpose, the exercise of that power will be struck down.
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Point No.IV: Whether the provisions of section 3 of the Act have been violated.
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rejection of its bid and the notice from the DG in the present matter were both issued on the same date i.e., 06.05.2010. However, the fact that the letter challenging the rejection of opposite party No. 2’s bid was sent after 06.05.2010 cannot be interpreted to mean that the decision to challenge the rejection was taken by the opposite party No.2 only after or because of the notice issued by the office of the DG. Accordingly, it is held that the above findings of the DG do not adequately support the conclusion regarding a possible bid manipulation or a tacit understanding in the present case.
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above. Besides, the informant has also not alleged such collusive conduct amongst the bidders. Moreover, in the absence of impleadment of necessary parties, a finding of contravention of section 3 of the Act would not be appropriate.
Chairperson
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3 issues framed by the court
Whether the Competition Commission has jurisdiction over lottery services under the Competition Act, 2002.
Whether appointing agents for lottery distribution is a sovereign function exempt from the Act.
Whether imposing a high gross turnover criterion for lottery bidders constituted abuse of dominant position or bid manipulation.
Colour shows how this judgement treated each authority
Sunrise Associates v. Government of NCT of DelhiReferred¶85
Sunrise Associates v. Government of NCT of Delhi, (2006) 5 SCC 603 · Who else cites this
Union of India v. Martin Lottery Agencies LimitedReferred¶85
Union of India v. Martin Lottery Agencies Limited, (2009) 12 SCC 209 · Who else cites this
B.R. Enterprises v. Union of IndiaReferred¶85
B.R. Enterprises v. Union of India, (1999) 9 SCC 700 · Who else cites this
Managing Director, Maharashtra State Financial Corporation and Ors. v. Sanjay Shankarsa MamardeReferred¶90
Managing Director, Maharashtra State Financial Corporation and Ors. v. Sanjay Shankarsa Mamarde, MANU/SC/0463/2010
Lucknow Development Authority v. M.K. GuptaReferred¶93
Lucknow Development Authority v. M.K. Gupta, AIR 1994 SC 787 · Who else cites this
Raj Kumar Shivhare v. Assistant Director, Directorate of EnforcementReferred¶95
Raj Kumar Shivhare v. Assistant Director, Directorate of Enforcement, (2010) 4 SCC 772 · Who else cites this
Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. and Ors.Referred¶97
Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. and Ors., (1987)1 SCC 424 · Who else cites this
Bangalore Water Supply & Sewerage Board v. A RajappaReferred¶109
Bangalore Water Supply & Sewerage Board v. A Rajappa, (1978) 2 SCC 213 · Who else cites this
N Nagendra Rao & Co. v. State of APReferred¶109
N Nagendra Rao & Co. v. State of AP, (1994) 6 SCC 205 · Who else cites this
Common Cause v. Union of IndiaReferred¶111
Common Cause v. Union of India, (1999) 6 SCC 667 · Who else cites this
Directorate of Education v. Educomp Datamatics LimitedReferred¶139
Directorate of Education v. Educomp Datamatics Limited, (2004) 4 SCC 19 · Who else cites this
Tata Cellular v. Union of IndiaReferred¶142
Tata Cellular v. Union of India, (1994) 6 SCC 651 · Who else cites this
3 provisions across 1 enactments
Jupiter Gaming Solutions Private Limited
Government of Goa
Martin Lottery Agency Limited
Competition Commission Chairperson
As recorded by the court registry
2 orders share this CNR
Judgements on the same questions, provisions and authorities, from every court
