By way of background, the State of Mizoram had issued an Expression of Interest (EoI) inviting bids for the appointment of lottery distributors and selling agents for State lotteries regulated by the Mizoram Lotteries (Regulation) Rules, 2011 (Regulation Rules) framed under the Lotteries (Regulation) Act, 1998 (Regulation Act).
The EoI specified that the minimum rate fixed by the Government of India is ₹5 lakh per draw for bumper and ₹10,000 per draw for others – bids less than these rates would be summarily rejected.
Five bids were received and out of which four bids, which quoted identical amount of ₹10,000, were selected. The State had also asked the successful bidders to furnish a security and deposit amount.
Respondent no. 4, a private company, complained against the same to the CCI pointing out that identical offers of ₹10,000 per draw were made in all four bids (one for paper and three for online) and a single bid of ₹5 lakh per draw was made for the bumper draw. These amounts were the minimum rates fixed under the EoI and the bidders had cartelised and entered into an agreement that had an appreciable adverse effect on competition in the lottery business in Mizoram, it was alleged.
There was bid rigging and a collusive bidding process which violated Section 3(1) read with Section 3(3) of the Competition Act, and also caused grave financial loss to the State of Mizoram, the respondent contended.
Respondent No. 4 also alleged that the State of Mizoram abused its dominant position as administrator of State lotteries, by requiring distributors to furnish exorbitant sums of money towards security, advance payment, and prize pool even before the lotteries were held.
The CCI’s Director General (DG) found prima facie evidence on cartelisation and big rigging against the the bidder companies, but the case against State was dropped by the DG.
It, however, observed that “bidding committee” allowed bidding to happen and that “it was a case of collusive bidding.”
The State moved the High Court by way of a writ petition challenging the adverse remarks made against it by the CCI. The High Court by an interim order halted the CCI final orders.
Later bidder companies too filed petitions before the High Court which by its order dated August 16, 2014 ruled that the CCI could not have investigated the case since lottery does not fall under the purview of Competition Act.
The Competition Act, the High Court opined, was applicable to legitimate trade and goods, and was promulgated to ensure competition in markets that are res commercium.
Thus, lottery activity being in the nature of res extra commercium could not be covered by the Competition Act and consequently the CCI did not have jurisdiction to entertain the complaint of respondent no. 4, the High Court ruled.
Source: Barandbench
