Jupiter Gaming Solutions Private Limited vs Government Of Goa And Anr

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').

A brief summary of the facts as mentioned in the information is as under:

2.1. The informant has stated that the opposite party No. 1 floated the Lottery Tender with, inter alia, the following pre-qualification terms and conditions:

a) The participating entity should be an income tax Assessee;

b) The participating entity should be either a proprietorship, partnership firm or a private limited company;

c) The minimum gross turnover of the participating entity should have been Rs. 4000 crore per annum during the last three financial years;

d) The participating entity should have experience of at least three years working directly with minimum two State Governments during the last five years;

e) The participating entity should not have any dues pending towards any State Government in which it operates or had worked in the preceding five years. The said proposal was required to be supported by a certificate issued by the concerned State Government;

f) That the participating entity should have a minimum net worth of Rs. 40 crore as on 31.03.2009, duly certified by a certificate from the Auditor/ Chartered Accountant;

g) Minimum guaranteed revenue to be offered had been stipulated as Rs. 12 crore per annum; and

h) A No Dues Certificate from the State Government where it was operating was required to be produced.

2.2. The informant has stated that the failure to meet one or more of the pre-qualification 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.

2.3. The informant has alleged that the Lottery Tender conditions had been formulated in order to favor only one entity, viz., the opposite party No. 2 which was evident from the fact that among all the lottery service providers in the country, only the opposite party No. 2 had a minimum gross turnover of Rs. 4000 crores during the last three financial years.

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.

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.

The Commission after hearing the informant, and on perusing the information and the documents filed in support thereof formed an opinion that there exists a prima facie case and directed the Director General ('the DG') to cause an investigation to be made into the matter vide its order dated 22.04.2010 under Section 26(1) of the Act.

The DG completed investigation and submitted a report dated 06.08.2010. The report of the DG has analyzed the lottery market in India with special emphasis on lottery operations in the State of Goa. The DG has noted that the bids received for the Lottery Tender were opened by the opposite party No. 1 on 08.04.2010 and on 06.05.2010 the contract was awarded to an entity named Sugal and Damani Enterprises Private Limited ('Sugal & Damani').

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.

4.3. The DG, inter alia, relied on the following facts which according to his findings rendered the tendering process doubtful:

a) The bid documents for more than one company were purchased by the same person;

b) An additional clause was inserted in ink in the financial proposal; and,

c) The use of whitener on the date of the proposal.

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 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.

The opposite party No. 1 in its reply/ comments/ objections to the report of the DG has denied all the observations and findings in so far as the same relate to it.

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.

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 in fructuous 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 there under. 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:

i. The minimum turnover of the participating entity should be Rs. 4000 crore per annum during the last three financial years;

ii. The minimum experience of the participating entity should be three years during the last five years in the capacity of marketing agent/ distributor directly with minimum two State Governments;

iii. The minimum net worth of the participating entity should not be less then Rs. 40 crore as on 31.03.2009 and for that a certificate should be submitted from a Chartered Accountant; and

iv. The proposal must be submitted along with an EMD of Rs. 5.00 crore.

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 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 favor two parties, viz., Play wing 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 Play wing 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 above said 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 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 were 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.

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.

The opposite party No. 2 has in its reply/ comments/ objections to the report of the DG has argued that the order dated 22.04.2010 directing the DG to investigate into the matter does not reflect any application of mind. It is further argued that the order does not contain reasons as to how the prima facie case was established 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 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 activity 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 have 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 have 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 have 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.

6.7. It has been submitted that the remarks made by the DG against the opposite party No. 2 are based on mere surmises and assumption. The inference drawn by the DG is false and completely wrong.

6.8. In view of the above submissions, the opposite party No. 2 have prayed inter alia that the investigations against it be dropped.

Before we proceed to frame the points which arise for determination in the present case, we may note that the informant filed an application to withdraw the information on 11.05.2010 on the ground that since the tender had already been awarded the prayer sought for by it had became in fructuous. However, the above application was rejected by the Commission vide its order dated 11.10.2005 since the Commission had found a prima facie case and directed the DG to cause an investigation to be made into the matter.

After considering the information, report of the DG, replies/ comments/ objections filed by the parties to the report of the DG and on perusal of the entire material available on record, the following points arise for determination:

I. Whether the Commission has jurisdiction on the subject matter, i.e., the lottery services in the present matter.

II. Whether the activity of appointing agents for distribution and marketing of lotteries is a sovereign function.

III. Whether the opposite party No. 1 has contravened the provisions of Section 4 of the Act.

IV. Whether the provisions of Section 3 of the Act have been violated.

Point No. I: Whether the Commission has jurisdiction on the subject matter, i.e., the lottery services in the present matter

It has been urged before us by the opposite party No. 2 that the Commission does not have the jurisdiction in the present matter as the activity in question is neither good nor service and hence beyond the purview of the Act. In support of the contention, the opposite party No. 2 has referred to and relied upon the following decisions: Sunrise Associates v. Government of NCT of Delhi (2006) 5 SCC 603; Union of India v. Martin Lottery Agencies Limited (2009) 12 SCC 209; and B.R. Enterprises v. Union of India (1999) 9 SCC 700.

We have perused the decisions cited by the opposite party No. 2 and we shall discuss the relevant cases at the appropriate stage.

To examine the contention urged by the opposite party No. 2, a reference may be made to the below quoted definition of the term 'service' as provided in Section 2(u) of the Act:

'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;

Thus, from a bare perusal of this definition, it is evident that the Act seeks to cover service 'of any description' within its purview. The expression 'service of any description' has a wide meaning as by insertion of the word 'any' the scope of the section has been expanded to include all kinds of services.

In Managing Director, Maharashtra State Financial Corporation and Ors. v. Sanjay Shankarsa Mamarde decided on 09.07.2010, the Hon'ble Supreme Court, while interpreting the term services as given in Section 2(o) of the Consumer Protection Act, 1986 observed that the use of the words 'any' and 'potential' in the context indicates that the width of the clause is very wide and extends to any or all actual or potential users.

The Hon'ble Supreme Court while interpreting the term 'any' in Lucknow Development Authority v. M.K. Gupta AIR 1994 SC 787 observed as under:

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 aforesaid meaning given to the word 'any' has been accepted by the Supreme Court in the case of Raj Kumar Shivhare v. Assistant Director, Directorate of Enforcement (2010) 4 SCC 772 where while construing the expression 'service of any description' under Section 2(o) of the Consumer Protection Act, 1986, the Court held that the meaning of the word 'any' depends upon the context and the subject matter of the statute.

In this regard, we may also note that the definition of the term service as given in Section 2(u) of the Act is not restrictive but an inclusive one. The Hon'ble Supreme Court in Reserve Bank of India v. Peerless General Finance and Investment Co. Ltd. and Ors. (1987)1 SCC 424 observed:

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.

In view of the above, it is manifest that lottery services are also covered within the meaning of the term service as defined in Section 2(u) of the Act and accordingly the Commission has the jurisdiction to entertain the present information. Thus, we find no merit in the plea raised by the opposite party No. 2 challenging the jurisdiction of the Commission and the same are therefore rejected.

Point No. II. Whether the activity of appointing agents for distribution and marketing of lotteries is a sovereign function.

It has been contended by the opposite party No. 2 that the present activity in question is with respect to appointment of the agents for the distribution and marketing of lotteries organized and promoted by the State of Goa. It has been further submitted that such an activity is a sovereign function performed by the respective department of the State Government. It is urged that floating of tenders for appointment of agents is an inalienable activity which can be performed only by the State Government as under the Lotteries (Regulation) Act, 1998 only the State Government is empowered and authorized to organize, conduct or promote a lottery. Hence, it is sought to be canvassed before us that the appointment of agents or distributors being under the scheme of the Lotteries Act and the same can only be performed by the State Government. Referring to the definition of enterprise as given in Section 2(h) of the Act, it is sought to be argued that the term enterprise has been defined as any person or department of the Government 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. However, it is urged that the definition excludes any activity 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, defense and space.

It has been submitted before us by the opposite party No. 2 that the emphasis, in the definition of the term enterprise, is on excluding activity that is relatable to the sovereign functions of the Government. It has been contended before us that in the present case floating of tenders as well as appointment of agents or distributors of the State lotteries can only be performed by the State Government of Goa to the 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.

Before we proceed to examine the issue, we may note that the Commission is empowered under the Act to inquire into any alleged contravention of the provisions contained in Sub-section (1) of Section 3 (Anti-competitive agreements) or Sub-section (1) of Section 4 (abuse of dominant position) by any enterprise. The Commission may also inquire into any contravention of the provisions contained in Section 6 (Regulation of combinations) by an enterprise.

Thus, before inquiring into any alleged contravention of the aforesaid provisions, it is incumbent to establish that the alleged violation has been done by an 'enterprise'. The word 'enterprise' has been defined in Section 2(h) of the Act as under:

"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, defense and space.

We may now refer to some judicial pronouncement elucidating the concept of sovereign functions as the same may throw some light on the meaning and scope of the term sovereign functions for our present purposes.

In Bangalore Water Supply & Sewerage Board v. A Rajappa (1978) 2 SCC 213, a seven judges Bench of the Supreme Court while interpreting the term 'industry' as defined in Section 2(j) of the Industrial Disputes Act, 1947 exempted the sovereign functions from the ambit of industrial law. However, the Court confined only such sovereign functions outside the purview of law which can be termed strictly as constitutional functions of the three wings of the State, viz., executive, legislative and judiciary and not the welfare activities or economic adventures undertaken by government or statutory bodies.

In N Nagendra Rao & Co. v. State of AP (1994) 6 SCC 205 the Supreme Court also approached the issue in the similar manner by observing that in welfare State, functions of the State are not only defense of the country or administration of justice or maintenance of law and order but it extends to regulating and controlling the activities of people in almost every sphere -educational, commercial, social, economic and political etc. It further observed that demarcating line between sovereign and non-sovereign powers for which no rational basis survives has largely disappeared. And thus, the Court observed that barring functions such as administration of justice, maintenance of law and order and repression of crime etc. which are among the primary and inalienable functions of a constitutional government, the State cannot claim any immunity.

Recently, the Supreme Court in Common Cause v. Union of India (1999) 6 SCC 667 also quoted with approval its aforesaid view on the issue.

From the analysis of case law on the question as to what constitutes 'sovereign' or 'non-sovereign' function, it appears that the courts have taken the view that the term 'sovereign function' is confined to strict constitutional functions of the three wings of the State.

In the present case, we have already held that lottery is a service for the purposes of the Act. Under the Lotteries Act the opposite party No. 1 has been given the exclusive authority to run the lotteries in the State of Goa and it is engaged in the activity of appointing operators for this purpose. Therefore, the opposite party No. 1 is covered within the definition of the term enterprise. Accordingly, it is held that the activity in question is covered under the definition of the term enterprise. Further, keeping in view, the nature of the activities involved, the same cannot be exempted from the purview thereof on the ground that it relates to sovereign functions. Thus, we hold that the Commission has jurisdiction to inquire into the present matter.

Point No. III: Whether the opposite party No. 1 has contravened the provisions of Section 4 of the Act.

The informant has alleged that the opposite party No. 1 enjoys a dominant position in the relevant market and has abused its dominant position by contravening the provisions contained in Section 4(2) of the Act.

For determination of this issue it is necessary to first determine and define the 'relevant market' in the present case. The report of the DG has analyzed the lottery market in India with special emphasis on lottery operations in the State of Goa. The report of the DG defines the relevant market as the lottery market in the State of Goa for the Goa Brand Lottery Scheme (Online and Paper Lotteries) under the Lotteries Act.

Before we proceed to examine the issue, it needs to be highlighted that the lottery business is owned exclusively by the government and it is a regulated activity. The Lotteries Act regulates the lottery operations in the country. Under Sections 4 and 5 of the Lotteries Act only state government has been authorized to organize, conduct, promote a lottery or prohibit such act. The Lotteries (Regulation) Rules, 2010 authorize the State government to conduct online and paper lottery. Rule 4 of the said Rules authorizes State government to specify qualification, experience and other 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 there under 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.

As per the explanation to Section 4 of the Act, the term 'dominant position' is defined as under:

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 favor.

As mentioned above, the opposite party No. 1 has been given the exclusive authority to run the lotteries in the State of Goa and it is engaged in the activity of appointing operators for this purpose and is therefore in a position of strength to operate independently in the relevant market. The mere fact that this position is enjoyed by virtue of a statute viz., the Lotteries Act, does not preclude the opposite party No. 1 from enjoying a dominant position.

In view of the above, it is clear that the opposite party No. 1 enjoys a dominant position in the relevant market and the activities of the opposite party No. 1 in relation to the relevant market is subject to examination in terms of the provisions of the Act.

As per the allegations in the information, the opposite party No. 1, which enjoys a dominant position, has abused the same by incorporating the condition requiring a participating entity to have a minimum gross turnover of Rs. 4,000 crore per annum during the last three financial years which was designed to favor the opposite party No. 2.

We have perused the submissions/ responses by the opposite parties, material on record and the report of the DG on the issue.

It has been submitted by the opposite party No. 1 that the impugned condition in the Lottery Tender was incorporated to ensure participation of bonafide entities. The opposite party No. 1 has also supported its submissions by citing examples where governments in other states in their respective lottery markets have incorporated similar conditions in the expression of interest issued by them.

At this stage, we may also note that the Hon'ble High Court of Bombay at Goa in the matter of M/s Pooja Fortune Private Limited v. The Government of Goa, Writ Petition (Civil) No. 265 of 2010 vide its order dated 13.04.2010 has upheld the conditions as incorporated by the opposite party No. 1 in the Lottery Tender. The Petitioner in the above matter had challenged the conditions including the impugned condition of the Lottery Tender as being unreasonable and arbitrary. The Hon'ble High Court of Bombay at Goa held that the above submission is not well founded and the Government of Goa i.e. the opposite No. 1 is well within its right to require a participant to have minimum gross turnover of Rs. 4000 crore per annum during the last three financial years. The Hon'ble High Court also opined that the manner in which an entity's capability to participate in the lottery tender is to be ensured is left to the decision of the State.

It is pertinent to quote the relevant observations from the aforesaid decision of the Hon'ble High Court of Bombay at Goa and the same are noted below:

...[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 up to a turnover of Rs. 1000 crores. The manner in which the same is to be ensured must be left to the decision of the Respondents.

The contention that a participant is required to pay only Rs. 12 crores are also not well founded, as the preformed 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.

The Court also relied on the decision of the Hon'ble Supreme Court in Directorate of Education v. Educomp Datamatics Limited (2004) 4 SCC 19 where the government was given flexibility to set the terms of the tender.

It is useful to quote the following observations made by the Hon'ble Supreme Court of India in Directorate of Education v. Educomp Datamatics Ltd. AIR 2004 SC 1962:

...[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.

We are conscious of the inherent limitations of judicial review of administrative action as observed by the Hon'ble Supreme Court in Tata Cellular v. Union of India (1994) 6 SCC 651 where at the Hon'ble Supreme Court observed that the Government is the guardian of the finances of the State and is expected to protect the financial interest of the State. It was also observed that the right to refuse the lowest or any other tender is always available to the Government and the right to choose 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.

We have given our thoughtful consideration on the issue in the light of the aforesaid observations of the Hon'ble High Court of Bombay at Goa and the Hon'ble Supreme Court.

In the present matter, it is noted that the very fact that two entities viz., the opposite party No. 2 and Sugal & Damani satisfied the requirements as laid down in the impugned condition negates the informant's contention that the impugned condition was tailored by the opposite party No. 1 to favor only the opposite party No. 2.

Further, there is no material on record to substantiate any malafide intention or bias on the part of the opposite party No. 1 for incorporating the impugned condition in the Lottery Tender. The fact that the Lottery Tender was finally awarded to just one entity viz., Sugal & Damani and the bid by the opposite party No. 2 was rejected further goes against the contention that the conditions of the Lottery Tender were drafted to favor only the opposite party No. 2 and to the detriment and prejudice of smaller entities such as the informant.

Therefore, in our view the allegation that the impugned condition was incorporated by the opposite party No. 1 to favor participation by only the opposite party No. 2 is devoid of any substance and the same is rejected.

Moreover, there is nothing on record to even suggest that but for the criterion in the impugned condition, there would have been enhanced participation in the Lottery Tender leading to entry of more number of players in the relevant market.

Thus, there is no substance in the allegation that the action of the opposite party No. 1 in keeping high turnover criteria of Rs. 4000 crore led to denial of market access to the other players in the relevant market in the present case and therefore, the allegation that Section 4(2)(c) of the Act has been violated is not made out.

In view of the above discussion, we find that the terms and conditions in the Lottery Tender as formulated by the opposite party No. 1 do not amount to an act of abuse of dominance and the same is not in contravention of Section 4 of the Act.

Point No. IV: Whether the provisions of Section 3 of the Act have been violated.

The DG in his report has also noted that the manner in which the bids for the Lottery Tender were submitted suggests that there has been a case of bid manipulation in the form of complimentary bidding or cover bidding which is volatile of the provisions of Section 3(3)(d) of the Act.

According to the report of the DG, the circumstantial evidence suggests the possibility of a tacit understanding between the opposite party No. 2 and Sugal & Damani due to which the former filed a defective bid so that the same may be rejected facilitating the award of the tender to Sugal & Damni. Further, as per the report of the DG, the above actions of the opposite party No. 2 caused a loss to the opposite party No. 1.

The facts and circumstantial evidence on which the DG has based his findings are summarized as under:

a) The opposite party No. 2 despite losing the bid has given detailed submissions defending the position of the opposite party No. 1.

b) Normally a party losing a bid would have also written against the sponsoring authority. However, the opposite party No. 2 avoided any allegation against the opposite party No. 1. Further, the opposite party No. 2 challenged the rejection of its bid by the opposite party No. 1 only after issuance of notice from the DG's office on 06.05.10.

c) There appears to be some meeting of minds among parties in course of bidding process as, inter alia, the same person had purchased forms for more than one participating entity.

d) The copies of the set of bid documents submitted by the opposite party No. 2 do not contain the stamp of the Joint Secretary, Government of Goa (the opposite party No. 1) and was not on the pre-printed forms supplied by it.

e) The copies submitted to the DG did not contain the additional conditions in the financial proposal due to which the bid was rejected. It is possible that the insertion of an additional clause in the financial proposal in the bid documents in ink might have been inserted by the opposite party No. 2 to make its bid defective and hence liable for rejection. Further, the use of whitener by the opposite party No. 2 to change the date of the proposal also raises some suspicion.

Before recording our conclusions and findings on the above specific circumstances highlighted and relied upon by the DG, we may mention that the findings recorded by the DG are neither categorical nor have the same been substantiated by any cogent material and evidence. In the absence of any corroborative evidence, it is not possible to hold that there was any meeting of mind or collusion or conspiracy or concerted action amongst the bidders or between the opposite parties.

We have gone through the aforesaid circumstances highlighted by the DG and our brief observations thereon are recorded below:

The mere fact that the opposite party No. 2 submitted detailed replies defending not only itself but also the opposite party No. 1 is not sufficient to indicate that the two were in a tacit arrangement in violation of Section 3(3)(d) of the Act.

We may further note that the opposite party No. 2's replies were limited to the allegation in the information and did not extend to whether or not the sponsoring authority i.e., the opposite party No. 1 wronged in rejecting the bid of the opposite party No. 2. With regard to the timing of the challenge of the rejection of its bid by the opposite No. 1, the opposite party No. 2 challenged the rejection vide its letter dated 18.05.2010. It is clear that letter informing the opposite party No. 2 regarding the 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.

While the facts relating to purchase of forms by the same person as noted by the DG raise doubts on the independent approach by the parties purchasing the forms for the Lottery Tender. However, in the absence of corroborative evidence, such facts are not in themselves sufficient to substantiate the finding that there was some meeting of minds between the opposite parties or between the opposite party No. 2 and Sugal & Damani, in particular.

The DG in his report has also noted that the copies of the set of bid documents submitted by the opposite party No. 2 do not contain the stamp of the Joint Secretary, Government of Goa and was not on the pre-printed forms supplied. In this connection, we may note the response of the Joint Secretary (Budget), Government of Goa to the DG's questions which explains that there was no condition requiring the bid proposals to be submitted on pre-printed forms only. Further, it was sought to be clarified that the bid documents could have been submitted without having the seal of the Government of Goa.

Thus, it is apparent from the responses of the opposite party No. 1 that the submission of the bid documents did not require either to be on the pre-printed forms or have a stamp of the Government of Goa. Accordingly, we are of the opinion that failure to submit the bid proposals on pre-printed forms and without the stamp of the opposite party No. 1 cannot be construed as evidence to substantiate the alleged violations of Section 3 of the Act.

It may be noted that the findings of the DG on contravention of Section 3 of the Act are not definite and the same are not backed by cogent evidence as discussed above. Besides, the informant has also not alleged such collusive conduct amongst the bidders. Moreover, in the absence of impalement of necessary parties, a finding of contravention of Section 3 of the Act would not be appropriate.

Therefore, in view of the forgoing discussion and after perusing the entire material available on record, the Commission is of the considered view that no contravention of the provisions contained in Sections 3 and 4 of the Act is made out against the opposite parties.

The information is found to be devoid of any merit and the same is rejected.

The Secretary is directed to inform the parties accordingly.

R. Prasad, Member (Dissenting)

Facts of the Case:

The present information has been filed by the Informant M/s Jupiter Gaming Solutions Private Limited against Finance Secretary, Government of Goa and M/s Martin Lottery Agency Limited (now Future Gaming Pvt. Ltd.) alleging contravention of the various provisions of the Competition Act, 2002. The Government of Goa had floated a tender on 11.03.2010 described as 'Proposal for Goa State Lotteries, Finance Department, Government of Goa', whereby expressions of interest were invited seeking bids for Goa Brand Lottery Schemes (Online and Paper Lotteries). The last date for purchase of proposal form was 25.03.2010 and last date for submission of proposal was 05.04.2010 and the evaluation was fixed on 08.04.2010. It is found that the proposal of Martin lottery Agency (Now Future Gaming Pvt. Ltd) was rejected by the Govt. of Goa and the tender was finally awarded to Sugal and Damani Pvt. Ltd.

The Allegations made in the Information:

(i) That the tender bid of Goa lottery contained certain conditions which restricted the size of bidders such as

a. The minimum of the gross turnover of the participating entity should have been Rs. 4000 crores per annum during the last three financial years;

b. The participating entity should have experience of at least three years working directly with minimum two State Governments during the last five years;

c. The participating entity should not have any dues pending towards any State Government in which it operates or had worked in the preceding five years.

d. That the participating entity should have a minimum net worth of Rs. 40 crores as on 31.03.2009.

e. The failure to meet one or more of the pre-qualification terms and conditions would have rendered the proposal of the participating entity liable to rejection.

(ii) That the above mentioned tender conditions had been clearly formulated in order to favor only one entity, namely, M/s Martin Lottery Agency Ltd, which was evident from the fact that among all the lottery service providers in the country, only M/s Martin Lottery Agency Ltd. had minimum gross turnover of Rs. 4000 crores during the last three financial years;

(iii) That the Finance Department, Government of Goa, by floating the tender had abused its dominant position by imposing unfair and discriminatory conditions which had limited/denied market access to all other entities, involved in providing services;

(iv) That the impugned conditions which had been imposed by Finance Department, Government of Goa had the effect of creation of barriers to new entrants and also foreclosure of competition by hindering entry into the market;

(v) That the entry barrier in terms of the high capital cost of entry had been designed to benefit M/s Martin Lottery Agency Ltd. to the detriment and prejudice of smaller entities which otherwise fulfilled all other requirements of the tender and had been successfully providing the marketing and support services to the various State Governments for the past several years.

The Commission heard the matter and on being satisfied that there exists a prima facie case, it directed the DG to cause an investigation into the allegations stated as above.

DG'S FINDINGS

The DG examined all the allegations right from floating of tender to the award of contract and the subsequent conduct of the parties in the whole process of tender bidding and submitted a detailed Investigation Report containing documentary evidences collected at the time of investigation. The investigation made by the DG essentially concentrated on following issues:

i) Whether it is a fact that that the Govt. of Goa had floated a tender for lottery containing certain terms and conditions which were in violation to provisions of Section 4(2) of the Act?

ii) Whether the terms and conditions stipulated in the expression of interest in the tender imposed unfair and discriminatory conditions which served as barriers to new entrants in the market, driving existing competitors out of the market, hindering entry into the market, in contravention to Section 4(2) of the Act?

iii) Whether the Govt. of Goa through its action & conduct in the whole process of bidding imposed the conditions which have the effect of creation of barriers to new entrants and foreclosure of competition by hindering entry into the market?

iv) Whether the process of handling, documentation and evaluation of the technical and financial bid was carried out as per the .laid down procedure in the bidding process which would have resulted in selection of qualifying bidders?

v) Was there a case of any collusive bidding by different enterprises who were party to the whole bidding process, based on circumstantial evidences, in violation to Section 3(3) of the Act?

M/s Martin lottery Agency (Now Future Gaming Pvt. Ltd) challenged the jurisdiction of the Commission over the case on account of three main reasons; i) that lottery is neither a good nor a service, and hence not covered under the Competition Act ii) that lottery is a pernicious activity, and it cannot be said that there is any service involved in operations of lottery; and iii) that the Govt. of Goa has the discretion to set out different conditions in a tender process such as turnover , net worth etc. which is not within the purview of the Courts. It also cited several decisions of various Courts in support of its claim.

The DG, on the other hand has rebutted the above arguments in detail and found no merits in the claim of the Respondent on the ground that the cited case examined the interpretation of lottery as goods or service for the purpose of applicability of Sales Tax or Service Tax on such lottery operations and, therefore, such findings would not be applicable to the definition of product/services defined in the Competition Act. The provisions of the Competition Act, 2002 takes into account under its ambit all activities which has adverse effect on competition which is clearly enshrined in the Preamble of the Act. Further, the term "Service" has been defined in the Act, which reads as under:

Section 2(u): "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;

The reading of the aforesaid definition shows that it uses the term "service of any description which is available to potential users" which would clearly mean that it has a wider meaning to cover any kind of service under its ambit since it is an inclusive definition. Therefore, the appointment of lottery vendors through the tender bid is a service which is hit by the provisions of the Competition Act.

Further, the term "Trade" defined in Section 2(x) reads as under:

"trade" means any trade, business, industry, profession or occupation relating to the production, supply, distribution, storage or control of goods and includes the provision of any services;

The aforesaid definitions, according to the DG, clearly cover the business of marketing, distribution and sale of lottery under Competition Act. It does not fit into the legal maxim "Expressio unius est exclusio alterius" which means that the express mention of one thing implies exclusion of another. The Competition Act seeks to prohibit all practices which restrict freedom of trade and definition of trade includes provision of any kind of service which would clearly include business of lottery.

In the context of averments based upon the judgments of Courts in the context of Sales Tax and Service Tax, relied by the opposite party, it is important to note that "Service tax" is now applicable on the service of promotion, marketing or organizing of games of chance, including lottery by the amendment brought out in the Finance Act, 2010 by creating a separate category of taxable service, w.e.f. 16.5.2008. In the light of aforesaid amendment, the judgment of the Apex Court in the case of Sunrise Associates, B. R. Associates & Martin Lottery Agencies Ltd. relied upon by the opposite party is not applicable in the present case. Further, Section 65(105) (ZZZN) of the Finance Act, 1994, CBEC Circular No. 334/1/2010-TRU dated 26.02.2010 has clearly included the promotion, marketing or organizing of Game of Chance including lotteries under the definition of "Services". Lastly, the Rule 21 of the Goa Lottery Regulation Rules, 2003 also envisages the operation of ticketing agents/vendors as services. In view of the above discussion, there is no iota of doubt that business of lottery is a service covered under the definition of Competition Act and other Acts governing "Service Tax". In the light of the aforesaid finding, the DG in the report, has concluded that the argument of the opposite party in questioning the jurisdiction of the Commission has no merits and hence, not maintainable.

The argument of Martin lottery Agency (Now Future Gaming Pvt. Ltd) that the activities of lottery are gambling and pernicious in nature and therefore bearing in mind the nature of the activity, it cannot be said that the State Government is providing any service to the public at large by conducting such business of lottery has also been considered and examined in the report of the DG. The DG has stated that in the case of BR Enterprises v. State of UP relied upon by the opposite party, the question before the Apex Court was whether Section 4 and 5 of Lotteries Regulation Act, 1998 which gives right to State Govts. either to organize or prohibit lotteries are valid piece of legislations and the Apex Court has justified the validity of these two sections of Lotteries Regulation Act, 1998. Interestingly, in this case, the Hon'ble Court has distinguished the meaning of trade and commerce as defined in Article 301 of the Constitution with Article 298 of the constitution which includes trade or business. The Apex Court in the cited case (Supra) has held that the word 'business' in Article 298 has a wider meaning than 'trade' in Article 301 and any transaction or activity other than `trade' would be 'business' of that State , which apart from 'trade' would also include activity to run State lotteries. Thus, sale of lotteries by State Governments even if not 'trade' as understood in common parlance, still it would be covered within the executive power of the State under Article 298 being activity in the nature of 'business' and in any case would also be covered by the words ' contract for any purpose'.

Therefore, based on the above interpretation by the Apex Court, the business of organizing lotteries by State Governments is liable to be covered within the ambit of Competition Act since "trade" in Section 2(x) of Competition Act, 2002 is not restrictive and has been given a wider meaning stating that trade means any trade, business, industry, profession or occupation relating to the production, supply, distribution, storage or control of goods and includes the provision of any services. Further, Section 2(u) while defining service also includes the term "business".

The report has also examined the business of lottery dealt by international jurisdictions. It is observed that lottery had come under scanner of anti-trust laws as in the case of Detacher Lotto in Germany wherein the monopoly of such enterprise was held to be anti-competitive by the German Federal Cartel office. Therefore, the contention of opposite party that activity of lottery as organized by State Governments cannot be made subject matter of inquiry under Competition Act, 2002, has no merit.

The DG's report has also scrutinized the authority of the Government of Goa in deciding terms & conditions of the tender documents for its lottery scheme. The arguments of the opposite party that State Govt. had prerogative to fix minimum turnover and net worth in tender conditions was also examined along with the case laws relied upon by the said party. It has relied upon several case laws in support of its arguments namely: Tata Cellular v. Union of India (1994)6 SCC 651, Raunaq International Ltd. v. I.V.R. Construction Ltd. and Ors. (1999) 1 SCC 492, Air India Limited v. Cochin International Airport Limited (2000) 1 SCR 505, Directorate of Education and Ors v. Educomp Datamatics Ltd. and Ors. AIR 2004 SC 1962 and Association of Registration Plates v. Union of India (UOI) and Ors. AIR 2005 SC 469 to state that the Commission cannot question the criteria fixed for participation in the tender in the instant case.

The aforesaid case laws (Supra) were examined and it is noted that Courts in these cases had not given blanket or absolute exemption from judicial scrutiny to such state authority. The courts have held that the conditions in tender documents or decision to award tender should not be arbitrary, discriminatory or actuated by malice. The Courts, thus, had not imposed any bar on examination of tender conditions, if they are discriminatory in nature. The provisions of Section 4 of the Competition Act, 2002 mandate the Commission to inquire into the cases where dominant players may restrict competition in the market by way of denial of market access and by imposing unfair and discriminatory conditions. In light of express provisions in the Competition Act mandating the Commission to inquire into such cases, the argument of the opposite party does not hold good.

The DG has further examined and analyzed the charges of abuse of dominance on the basis of the documents and statements of Jupiter Lotteries, Future Gaming Solutions, Sugal and Damani Enterprise and the Government of Goa and found that two bids were received in response to expression of interest issued by Govt. of Goa. Namely: Future Gaming Solutions India Private Limited (earlier Martin Lottery Agency Limited) and the other from Sugal and Damani Enterprises Private Limited. Both were meeting the turnover and net worth criteria. The bid of Future Gaming Solutions was not accepted at the time of evaluation, considering it non-responsive. Finally, it was Sugal and Damani who was awarded the contract. Thus, the allegation that the tender was floated only to favor Martin Lottery Agency Limited was not found to be true.

The DG has also examined all factors of dominance stated in Section 19(4) applicable to the facts of the present case. It has been adequately established that the Government of Goa enjoyed the position of dominance, since they are solely engaged in the work of awarding the tender to successful bidder for running Goa Lotteries, which no other enterprise can do so in the territory of Goa. The Government of Goa hold position of dominance in terms of explanation (a) to Section 4 of the Competition Act, 2002 read with Section 19(4) of the act which has been elaborately discussed in the report. It is undoubted that Govt. of Goa has the ability to behave /act independently of the competitive forces prevailing in the relevant market since they have been given exclusive authority to run lotteries under the Lotteries Regulation Act, 1998. In terms of provisions of explanation (a) to Section 4(2) of the Competition Act, 2002 read with Section 19(4) of the act, Government of Goa, certainly enjoys the position of dominance (in fact the only player) in the relevant market of lotteries in Goa under the Goa Brand Lottery Scheme (online and paper lotteries) under the Lotteries (Regulation) Act, 1998 and the Rules made there under. The analysis of the factors, establishes dominance of Government of Goa in its areas of operations in the relevant market of running and conducting Goa Lotteries. Hence after proving dominant position of the enterprise, the report examined all the acts of abuse listed in Section 4(2) of the Act.

It is pertinent to mention here that dominance per se is not bad, but its abuse is treated bad in Competition Law in India. Abuse is said to occur when an enterprise uses its dominant position in the relevant market in an exclusionary or /and an exploitative manner. Section 4 of the Act gives an exhaustive list of practices that shall constitute abuse of dominant position and, therefore, are prohibited. Abuse of dominance is judged in terms of specified acts committed by a dominant enterprise. Such acts are prohibited under the law. There is no need for any reference by the Commission to the adverse effect on competition in Indian Markets. These practices are just prohibited, as an abuse of its dominant position and therefore, the Act does not envisage to explicitly prove such abuse of dominance only when it causes or likely to cause an appreciable adverse effect on competition in the relevant market within India. Rather, any abuse of the type specified in the Act by a dominant firm shall stand prohibited. Once the dominance is established then the Commission shall look into the practices listed in Section 4(2) and if the enterprises are found to be engaged in such practices the abuse of dominant position shall be established since such acts are prohibited under Law.

The DG has examined in detail the terms & conditions of the tender documents with the purpose of ascertaining as to whether these imposed unfair and discriminatory conditions limiting /denying market access to all other entities; and has the effect of creation of barriers to new entrants and foreclosure of competition by hindering entry into the market. It is noted from the tender documents that only those entities/persons were eligible to participate that fulfilled among others the following conditions: i) Bidder should have a minimum gross turnover of Rs. 4000 crore during the last three financial years. ii) Bidder should have net worth of more than Rs. 40 crore.

The aforesaid conditions placed in the tender documents clearly shows that Government of Goa had set very high eligibility criteria to qualify and participate in the bidding process which is evident from the fact that only two bidders participated in the tender. There has been consternation among other players in the market and therefore while one of the player-Jupiter Gaming filed petition in the Competition Commission of India, while another party -Puja Enterprises filed a writ petition in the High Court of Bombay. These high parameters also have the effect of creating barriers to entry to the smaller players who may be having a turnover of less than Rs. 4000 crore. In case the conditions of minimum turnover of Rs. 4000 crore would not have been there, more number of participants could have participated in the tender process. The entry of more players could have been facilitated by doing away with the high turnover criteria.

It is the observation of the DG that the condition of minimum turnover of Rs. 4000 crore and net worth of Rs. 40 crore stipulated in the tender documents also does not stand justified keeping in consideration the dynamics of the lottery business which involved nothing more than selling of tickets, collection of money and remitting the minimum commitment to the Government of Goa. Thus, such high criteria of turnover and net worth of the bidder could be justified in large civil/construction/infrastructure projects, but certainly not in such low risk business of running lotteries. The Government of Goa also not able to explain and justify the reasons for such criteria in the tender documents. Mr. Anand Sherkhane, Joint Secretary, Govt. of Goa could not give any explanation on this minimum cap of Rs. 4000 crore of turnover as evident from his statement dated 12.07.2010. The DG, therefore, concluded that the allegations that Govt. of Goa has abused its dominant position by denying market access to all lottery players stand substantiated.

Further, it was stated in the DG's report that in the `expression of interest' floated for the purpose, that the State Govt. of Goa was expecting a minimum guaranteed amount of Rs. 12 crore from the operators on a turnover of Rs. 1000 crore and 0.25% over and above the turnover of Rs. 1000 crore. The selected bidders were required to pay to the Govt. of Goa the guaranteed amount, only after collecting money from the people buying lottery tickets. Moreover, the EMD of Rs. 5 crore deposited by the participating and successful bidder was also supposed to be adjusted towards remission of revenues. Thus, even if the turnover criterion of Rs. 4000 crore in the tender documents was to be removed, than it would not have impacted the prospect and revenue of the Government of Goa. But for higher turnover criteria in this case, there would have been enhanced participation, leading to easing out of the entry barriers, facilitating entry of more number of players in the relevant market.

In the light of above discussions it has been held by the DG that the information on the action of Govt. of Goa in keeping high turnover criteria of Rs. 4000 crore and net worth of Rs. 40 crore has resulted in denial/restriction of market access to the other parties in the relevant market. This action is found to be in contravention to provisions of Section 4(2) (c) of the Competition Act, 2002.

The DG, during the course of investigation, found certain intriguing and surprising sequence of events and facts which raises serious concerns on the possibilities of bid manipulations. These are as under:

(i) The enquiries had revealed that a total of nine bid documents were purchased between 11.3.2010 to 25.3.2010 as per records of Govt. of Goa and the details of which are given in Chart on page 40 of the report. It was noticed that the proposal form of bid in the name of Kwik win gaming solutions, Tashi delek gaming solutions were purchased by one Mr. Harish as evident from the signature on the Register. These two entities therefore, appear to be front companies of Jupiter Gaming Pvt. Ltd. which in turn is inter-related to Zee Essel Group as apparent from Exhibit-7 of the DG's report. Similarly, the three forms in the case of Sugal & Damani Enterprise, Swagat Business Pvt. Ltd. and Skill Lotto Solutions have been purchased by the same person and therefore, these enterprises appear to be closely related. Lastly, the forms of Krishna Agencies and MJ Associates have been purchased by the same person. Thus, the purchase of forms appears to have been made in the name of front companies belonging to the main players in the business of lottery.

(ii) The proposal both for the technical and financial bids were supplied on a printed forms containing a unique number and stamp of Joint Secretary, Govt. of Goa after payment of a deposit of Rs. 25,000 for each form. This has been confirmed by the Joint Secretary (Budget), Govt. of Goa in his statement dated 12.7.2010.

(iii) The bid documents of Sugal & Damani were submitted in the pre-printed bid forms containing proposal form No. FIN-BUD/Lot/2010/0004 on both technical as well as financial proposal. However, the bid document of Future Gaming Pvt. Ltd. was submitted on a separate stationary which did not contain the stamp of the Joint Secretary and the unique number (not pre-printed bid form). The said typed bid document contained form No. FIN-BUG/2010/0001 dated 3.4.2010 for the technical proposal and No. FIN-BUG/2010/0007 dated 3.4.2010 for the financial proposal. Further, the said financial proposal form also had an insertion of additional condition written in hand with ink stating: "The 0.25% mentioned on their additional turnover exceeding Rs. 1000 crores is subject to negotiation." (As per affidavit dated 5.7.2010 given in confidential cover). The bid proposal of Future Gaming was rejected primarily on this ground of inserting additional condition in the bid document.

iv) However, it was noticed that the copies of the bid document submitted by Future Gaming Pvt. Ltd. earlier to this office vide affidavit dated 20.5.2010 (confidential) were on the pre-printed stationary containing the unique number -FIN- BUG/2010/0001 dated 3.4.2010 both on the technical and financial proposal. The said bid document also did not have any additional condition or alteration made in ink.

v) Thus, two sets of bid documents were submitted to this office on two different dates as mentioned above. The Future Gaming had explained the discrepancy by stating that they had inserted the additional clause with ink in the bid document at the time of submission the same before the Govt. of Goa.

vi) Further, bid documents of all the parties was also submitted by the Govt. of Goa vide letter dated 15.7.2010 (Exhibit-9). The examination of the bid document pertaining to Future Gaming Pvt. Ltd. as submitted by the concerned party and the Govt. of Goa showed several differences in the bid documents which have been highlighted in the Table given on page 44 of the report.

vii)The original bid document of Future Gaming Pvt. Ltd. submitted by the Govt. of Goa revealed some startling and unusual facts which deserve attention of the Commission. The examination of the said original bid document showed that it was on a separate stationary which did not bear the stamp of the Joint Secretary and the date was written as "3rd April, 2010" after using whitener. The back of the page shows the date as 15.3.2010. In other words, the original date of 15.3.2010 was changed to 3rd April, 2010 by using the whitener. Further, the typed technical proposal contained No. FIN-BUG/2010/0001 and the financial proposal contained the No. FIN-BUG/2010/0007 dated 3.4.2010. Thus, the form number of the technical bid did not match with the financial bid in this case.

viii) It was also noticed that as per the laid down procedure, all the bids in sealed cover had to be dropped in a sealed box in the office of Govt. of Goa. However, in the case of Future Gaming Solutions Pvt. Ltd. it was noticed that the Govt. of Goa obtained signature of two persons indicating the date and time of receipt of the bid proposal as exception to the normal procedure. This appears to have done to create an evidence for the existence and receipt of non-printed typed bid form containing additional condition put in ink.

ix) The aforesaid anomalies/discrepancies were confronted to both the Govt. of Goa and Future Gaming Solution Pvt. Ltd. but no satisfactory explanation could be furnished by them. As a matter of fact the Joint Secretary in his statement dated 12.7.2010 has stated that the anomalies/errors in the bid document of Future Gaming Solution Pvt. Ltd. were omitted to have been noticed by the Tender Evaluation Committee.

The aforesaid sequence of events, discrepancies in the set of tender documents of Future Gaming Pvt. Ltd., insertion of additional condition by hand in ink in the financial bid document, change in date of the bid proposal by using whitener, and non-satisfactory explanation by the Govt. of Goa and the target party, raises valid suspicion to the whole -bidding process in this case. The most pertinent question that arises is as to why Future Gaming Solutions Pvt. Ltd. had inserted additional condition by hand in ink in the financial proposal document just before submitting the bid, despite realizing that such "conditional bid" are liable for rejection. Similarly, why didn't the Tender Evaluation Committee of Govt. of Goa did not raise objection to the non-printed typed tender form of Future Gaming Solutions Pvt. Ltd. at the time of opening the bid on 8.4.2010. Further, why no specific representation by way of letter or statement was made by Future Gaming Solutions Pvt. Ltd. at the time of opening of the bid. The minutes of the Tender Evaluation Committee dated 8.4.2010 and 16.4.2010 does not find any mention of such notice of discrepancies (Exhibit-10). It is relevant to mention here that a so called representation to the Govt. of Goa was made on 18.5.2010, only after receipt of notice from this office seeking explanation on their rejection of proposal. It is also not explained satisfactorily as to why Future Gaming Solutions Pvt. Ltd. did not fill up the bids in the pre-printed proposal form containing unique number and stamp of Joint Secretary. Similarly, why and how typed forms without stamp were accepted by the Govt. of Goa with total disregard to the security and validity of such printed forms. At the same time why and how the Tender Evaluation Committee failed to take note on the discrepancies with respect to the two different numbers on technical and financial proposals as also the change made in the date of the form as 3rd April, 2010 by using whitener, whereas the proposal form contained the date as 15.3.2010.

All the facts and circumstances, emanating from the sequence of events and suspicious conduct of Future Gaming Solutions Pvt. Ltd. point towards the possibilities of some kind of tacit understanding with the other bidder -Sugal & Damani who was finally awarded the bid contract. The investigation has also tried to examine the possible financial motive of such act of Future Gaming Solutions Pvt. Ltd in the whole bidding process. The perusal of the terms and conditions of the bid design of the Goa lotteries shows that it could have appointed more number of parties instead of one as successful bidder, since there was no requirement of appointing only one distributor. This issue was also deliberated in the meeting of the Tender Evaluation Committee dated 16.4.2010. The bid design of the Govt. of Goa stated that the successful bidder had to pay Rs. 12 crores as minimum guarantee for turnover exceeding Rs. 1000 crores and 0.25% on additional amount over and above Rs. 1000 crores. Therefore, considering the fact that both the parties: (i) Sugal & Damani (ii) Future Gaming Solutions Pvt. Ltd. met all the requirements of the expression of interest including the minimum gross turnover of Rs. 4000 crores per annum and net worth of Rs. 40 crores, were eligible to be appointed as distributors. Therefore, if the appointment of two bidders were to be made, it would have resulted in earning of income of Rs. 24 crores to the Govt. of Goa. Therefore, by putting additional condition in the financial bid in ink by Future Gaming Solutions Pvt. Ltd. and thereby making it liable for rejection so that only one party is awarded the contract has clearly financial motive hidden to it. Thus, by rejection of bid of Future Gaming Solutions Pvt. Ltd. on technical reasons and thereby appointment of one party, namely, Sugal & Damani, the Govt. of Goa was eligible to an income of Rs. 14.5 crores as against Rs. 24 crores if two parties were to be awarded the contract. Comparative analysis of such equation has been given on page 49 of the report. In other words, it was more beneficial for bidders if they decided to sit together, formulate a strategy and try to ensure that only one party gets contract, instead of two. It appears that Future Gaming initially filled up the printed form as procured from Govt. of Goa. However, on re-consideration, possibly after holding discussions with Sugal and Damani Group, it submitted another bid and inserted additional conditions which made its bid liable for rejection. Thus resorting to such modus operandi, the guarantee money liable to be paid by the second party was avoided and to be shared beneficially by the two concerns. This equation appears to be the real motive, since the lottery business of Future Gaming is not likely to be hampered because as per the terms of the agreement with Government of Goa, M/s. Sugal and Damani could engage sub-agents/retailers. Thus, it appeared to be a case of collusive transaction of bid manipulation by the parties wherein the Government of Goa was made to lose substantial revenue which in turn was shared by the two parties.

In the light of several discrepancies in the set of tender documents of Future Gaming Pvt. Ltd; insertion of additional condition in the financial bid document by hand in ink; change in date of the bid proposal by using whitener; financial motive and loss to revenue to Government of Goa, and non-satisfactory explanation by the Govt. of Goa and the target party; the investigation report has concluded that Bid Rigging in the form of Complementary Bidding or Cover Bidding had taken place in this case. It is a form of price fixing and market allocation, often practiced, where contracts are determined by a call for bids. Bid-rigging almost always results in economic harm to the agency which is seeking the bids, and to the public, who ultimately bear the costs as taxpayers or consumers.

Complementary bidding, or cover bidding, is a form of bid rigging where some of the bidders bid an amount knowing that it is too high or contains conditions that they know would be unacceptable to the agency calling for the bids. In the instant case, the agreement dated 06.05.2010, between Govt. of Goa and Sugal and Damani permits the latter to engage agents. Thus, a possibility of some kind of understanding between Sugal and Damani and Future Gaming group by which Future Gaming or its allied concerns may get share of business of Goa Lotteries from Sugal and Damani cannot be ruled out. The statement of Mr. Naresh Mangal, Director of Sugal and Damani Enterprises Private Limited (Annexure-E) suggest that there is no problem between the three major players in the business of lottery and they independently continue to sell tickets of all State Government including Government of Goa. This said statement therefore, shows that there is some sort of cooperation between all three -Sugal and Damani, Future Gaming and Essel group, with respect to business of lottery operations of the State Govt. of Goa. Further, from the statement of Jagesh Dhamija of Future Gaming Solutions Private Limited and statement of Naresh Mangal, Director of Sugal and Damani Enterprises Private Limited, it is clear that the three main players are working together or have their respective territories. Thus, there could be incentive for them to allocate market for themselves.

Bid Rigging has been defined in Explanation to Section 3, Sub-section (3) of the Competition Act, 2002 which reads as follows:

Any agreement, between enterprises or persons referred to in Sub-section (3) engaged in identical or similar production or trading of goods or provision of services, which has the effect of eliminating or reducing competition for bids or adversely affecting or manipulating the process for bidding.

The agreement in Competition Act need not be in writing only; it can be oral as well. Further, any understanding or action is also covered as an agreement for the purposes of Competition Act. Thus, the objective of securing the most favorable prices and conditions may be negated if the prospective bidders collude or act in concert. Such bid rigging contravenes the very purpose of inviting tenders and is inherently anti-competitive.

It may be relevant to mention here that Bid rigging is difficult to detect since it is executed in secrecy with only the participants privy to the scheme of conspiracy. Therefore, its detection can be made only by way of assessing the suspicious conduct, patterns of abnormal activities in the bidding process, exception to the normal procedures and loss to the Government Department. There are number of situations of suspicious behavior of Future Gaming and other parties which clearly point out towards bid rigging in this case. In this case, it prima-facie appears that additional conditions in ink had been inserted by Future Gaming to make its bid liable for rejection and thereby resorting to mechanism of cover bidding. This finding in the investigation report draws support from the fact that M/S Future Gaming did not raise any objection to the technical rejection of its bid before the Govt. of Goa, until such time a notice was issued by this office. Further it appears that Future Gaming had accepted the rejection of its bid without any serious challenge since it has not contested for any review of the decision of Government of Goa or filed a case in Court of Law.

The existence of bid rigging in the aforesaid case also finds support from OECD guidelines which suggest certain factors which facilitate efforts of bid rigging namely: i) Bid rigging is more likely to occur when a small number of companies supply the good or service. The number of players in lottery business is very limited and thus it was easier for these parties to reach a collusive agreement. ii) When few businesses have recently entered or are likely to enter a market because it is costly, hard or slow to enter, firms in that market are protected from the competitive pressure of potential new entrants. The protective barrier helps support collusive actions. The bid design of Govt. of Goa calling for higher threshold of turnover and net worth has facilitated this transaction. iii) When the products or services that individuals or companies sell are identical or very similar, it is easier for firms to reach an agreement on a common strategy. The two companies which have submitted tender bids for lottery are definitely engaged in identical products or services. Therefore, all the factors enumerated by the OECD are applicable to the fact of the case to suggest bid rigging by the concerned parties. Thus, after considering all circumstantial evidence, manipulations in the bid documents, behavior of the parties, the DG concluded that bid rigging in the form of cover bidding had taken place in this case in violation to Section 3(3) (d) of the Competition Act.

The finding in the investigation report also draws strength from the case of Detacher Lotto -und Toto block's of the German lottery, wherein the Higher Regional Court in Düsseldorf held that the agreement between the lottery operators to restrict the operations in their given territories was a cartel and hence anti-competitive in violation to the German and European Laws. This shows that lottery business has come under scanner for their cartel like behavior in other international jurisdictions and therefore makes a strong argument of bid rigging which is anti-competitive in nature in contravention to provision of Section 3(3) (d) of the Act.

In the light of discussions in the preceding Para's, the investigation report submitted by the DG has essentially brought out two major findings in this case, namely:

(i) The investigation found that the allegation of abuse of dominant position by the Govt. of Goa stands substantiated by designing bid documents that contained several terms and conditions leading to deprivation of smaller parties to participate in the tender process. Further, it also denied market access through design of bid documents in a particular manner, which is in contravention to provisions of Section 4(2)(c) of the Act.

(ii) The investigation has also unearthed on the basis of available record and other circumstantial evidences, the existence of bid rigging in the awarding of the distributor contract of Goa lotteries. The evidences in the form of discrepancies in the tender documents of Future Gaming Pvt. Ltd; insertion of additional condition in the financial bid document by hand in ink; change in date of the bid proposal by using whitener; financial motive and loss to revenue to Government of Goa, and statements of the concerned parties clearly suggest of some sort of tacit understanding/agreement wherein Future Gaming Solutions was made to file a defective bid so that contract could be awarded to Sugal & Damani and thereby the evasion of commitment money to the govt. of Goa could be shared between them. Further, 'the poor manner in which Jupiter Gaming Pvt. Ltd. has pursued its information before this office and subsequent withdrawal of such information also suggests that this party associated with Zee Essel Group may also have entered in to some kind of understanding in the whole bidding process in this case.

In view of the aforesaid findings in the report, the DG has suggested that the design of the tender process may be modified that would maximize the potential participation of genuinely competing bidders in order to enhance effective competition. The bid design should essentially contain basic elements which reduces the cost of bidding, enlarges the number of potential bidders, proper guidelines for evaluation of bids and finally it should promote the purpose of the Govt. to maximize revenue. Thus, unwarranted restrictions may be avoided while designing tender documents so that the number of bidders is not reduced, without sacrificing suitable performance criteria of the bidders in the tender documents. It is important to ensure that qualitative selection and awarding criteria are chosen in such a way that credible bidders, including small and medium enterprises, are not deterred unnecessarily in the bidding process. It is, therefore, suggested that the Commission may direct the Govt. of Goa to redesign its tender documents which shall remove entry barriers and denial of market access to the potential bidders in order to promote competition in the market of Goa lotteries in India.

Lastly, the bid rigging detected on the basis of circumstantial evidences in the investigation report deserves special attention of the Commission. The conduct of the parties, discrepancies in the bid documents, the handling and evaluation of such documents clearly suggest that everything was not proper and fair in the whole process of bidding. The Commission may kindly take note that there has been debate in the assembly of Goa over the validity of the tender processing of Goa lotteries (Exhibit-11of the DG's report) and therefore, lends credence to the possibility of bid rigging in this case. It is, therefore, suggested that the Commission may take up the matter with the Govt. of Goa for instituting an enquiry into the whole process of designing and awarding the tender in this case so that all shortfalls and defects in the procedure are rectified.

FINDINGS ON MERITS:

I have carefully considered the allegations made in the Information and the Investigation Report submitted by the DG. The submission made by the informants and the Respondents during the proceedings before the Commission was also considered. After due considerations of the facts of the case and the evidences gathered by the DG, I find that basically there are two issues involved in this case:

Whether Government of Goa has abused its dominant position by unilaterally imposing certain unfair and discriminatory conditions in floating a tender for lottery operations in Goa which resulted in:

a. creation of barriers to new entrants in that market

b. denial of market access to all other entities; and

c. the foreclosure of competition by hindering entry into the lottery market.

Were there any collusive bidding/ bid rigging on the part of M/s Martin Lottery Agency Limited (now Future Gaming Pvt. Ltd.), Jupiter Gaming, M/s Sugal and Damani Pvt. Ltd and other enterprises in terms of provisions to Section 3(3) (d) of the Act?

On the first issue let us examine what are the allegations that have been leveled against the Govt. of Goa. It has been alleged by the Informant that the Govt. of Goa had put certain conditions such as the participating entity should have the minimum of the gross turnover of Rs. 4000 crores per annum during the last three financial years; the participating entity should have a minimum net worth of Rs. 40 crores as on 31.03.2009; the minimum guarantee revenue to be offered stipulated as Rs. 12 crore; the participating entity should have experience of at least three years working directly with minimum two State Governments during the last five years; and the participating entity should not have any dues pending towards any State Government in which it operates or had worked in the preceding five years and the failure to meet one or more of the pre-qualification terms and conditions would have rendered the bid of the participating entity liable to be rejected. These conditions, according to the Informant, had been clearly formulated in order to favor only one entity, namely, M/s Martin Lottery Agency Ltd, which was evident from the fact that among all the lottery service providers in the country, only M/s Martin Lottery Agency Ltd. had minimum gross turnover of Rs. 4000 crores during the last three financial years and thus, the impugned conditions which had been imposed by Government of Goa had the effect of creation of barriers to new entrants and also foreclosure of competition by hindering entry into the market thereby it had abused its dominant position by imposing unfair and discriminatory conditions.

The Govt. of Goa, on the other hand has denied these allegations and given following reasons for putting these conditions:

That the clause of minimum gross turnover of Rs. 4,000 crores per annum was to ensure that only bonafide firms participate in the tender.

That the stipulation of minimum 3 years experience with two State Govts. was due to requirement of an experienced operator.

That the criteria of net worth of Rs. 40 crores as on 31.3.2009 was again to ensure bonafide and genuineness of the firms.

That minimum guarantee revenue stipulated as Rs. 12 crores was on the basis of previous experience as well as experience of other States.

That the allegation that tender conditions were designed to favor only the one entity is not sustainable since Sugal & Damani also qualified for the bid and eventually got the tender.

M/s Martin Lottery Agency Limited ( whose name was subsequently changed to Future Gaming Solutions India Pvt. Ltd.) while defending its case stated that the allegation that GoG had designed the tender to favor Future Gaming was baseless because the proposal by Future Gaming was rejected and proposal submitted by another competitor namely Sugal and Damani has been accepted. According to the Respondent, the informant has tried to mislead the Commission by moving an application to withdraw the information once M/s Sugal & Damani got the tender. It is thus, proved that Future Gaming was not the only entity with a turnover of about Rs. 4,000 crores as was alleged.

M/s Future Gaming has further argued that the floating of tender for the lottery operation in the State of Goa can not be considered as "purchase or sale of goods or service" within the meaning of Section 4(2) (a) of the Act. In support of its argument M/s Future Gaming has quoted several decisions of the Supreme Court wherein it has been held that lottery is a gambling and it is neither a service nor a good but mere an actionable claim. So, it has been argued by M/s Future Gaming that since no service is rendered to general public and since it is not a good or service, the GoG can not be held to have indulged into any activities as defined in Section 2(h) and 2(u) of the Competition Act.

It further, states that CCI does not have jurisdiction over this case as dominant position can only be examined in respect of goods or services. The information does not define "relevant market" where Govt. Of Goa has allegedly abused its dominant position. Relying on Supreme Court decision in Tata Cellular v. UOI and Air India v. Cochin International Airport Ltd the State of Goa had full discretion to fix its own turn over while floating a tender. The informant's prayer for the deletion of the turn over criteria is, therefore, not sustainable.

The argument that lottery is neither a good nor service but only an "Actionable Claim" was examined by the DG in detail and its findings have already been described in preceding paragraphs and are not being repeated for the sake of brevity. I fully agree with the findings of DG who held that there is no merit in the argument of the Respondents as the case laws cited by them have been interpreted in a different context and, therefore, such findings would not be applicable to the present case. The Services have been defined in the Competition Act which reads as under:

Section 2(u): "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;

I agree with the interpretation of the aforesaid definition by the DG that it uses the term "service of any description which is available to potential users" which would clearly mean that it has a wider meaning to cover any kind of service under its ambit since it is an inclusive definition. Therefore, the appointment of lottery vendors through the tendering process is a service and provisions of the Competition Act are undoubtedly attracted in this case.

The context and the applicability also changes from time to time according to the economic needs and that is why the extent of the "Service tax" has been enlarged and it is now applicable to the service of promotion, marketing or organizing of games of chance, including lottery by the amendment brought out in the Finance Act, 2010 by creating a separate category of taxable service, w.e.f. 16.5.2008 and the CBEC Circular No. 334/1/2010-TRU dated 26.02.2010. Thus, the DG is right that in the light of aforesaid amendment, the ratios of the decisions of the Apex Court in the case of Sunrise Associates, B.R. Associates & Martin Lottery Agencies Ltd. relied upon by the Respondents cannot be applied to the present case. Lastly, the Rule 21 of the Goa Lottery Regulation Rules, 2003 also envisages the operation of ticketing agents/vendors as services. The DG therefore, is right in concluding that the business of lottery is a "Service" and clearly covered under the definition of Competition Act.

Another argument that the lottery activities and gambling are pernicious in nature and bearing this in mind, it cannot be said that the State Government is providing any service to the public at large by conducting such business of lottery. This issue has been considered by the DG in the light of the decisions relied upon by the Respondents and it is found that that in the case of BR Enterprises v. State of UP the question before the Apex Court was whether Section 4 and 5 of Lotteries Regulation Act, 1998 which gives right to the State Govts either to organize or prohibit lotteries are valid piece of legislations and the Apex Court has justified the validity of these two sections of Lotteries Regulation Act, 1998. Interestingly, in this case, the Hon'ble Court has distinguished the meaning of trade and commerce as defined in Article 301 of the Constitution with Article 298 of the constitution which includes trade or business. The Apex Court in the cited case (Supra) has held that the word `business' in Article 298 has a wider meaning than `trade' in Article 301 and any transaction or activity other than `trade' would be `business' of that State, which apart from `trade' would also include activity to run State lotteries. Thus, sale of lotteries by State Governments even if not `trade' as understood in common parlance, still it would be covered within the executive power of the State under Article 298 being activity in the nature of 'business' and in any case would also be covered by the words ' contract for any purpose'. Therefore, based on the above interpretation by the Apex Court, the business of organizing lotteries by State Governments is liable to be covered within the ambit of Competition Act since "trade" in Section 2(x) of Competition Act, 2002 is not restrictive and has been given a wider meaning stating that trade means any trade, business, industry, profession or occupation relating to the production, supply, distribution, storage or control of goods and includes the provision of any services. Further, Section 2(u) of the Competition Act while defining service also includes the term "business".

The report has also examined the business of lottery dealt by international jurisdictions. It is observed that lottery had come under scanner of anti-trust laws as in the case of Detacher Lotto in Germany wherein the monopoly of such enterprise was held to be anti-competitive by the German Federal Cartel office. Therefore, the contention of opposite party that activity of lottery as organized by State Governments cannot be made subject matter of inquiry under Competition Act, 2002, has no merit.

Coming to the authority of the Government of Goa in deciding terms & conditions of the tender documents for its lottery scheme, the arguments of the opposite parties are that it is the prerogative of the State Govt. to fix minimum turnover and net worth in tender conditions and the Commission cannot question the criteria fixed for participation in the tender were also examined by the DG along with the case laws relied upon by the said party e.g. Tata Cellular v. Union of India (1994) 6 SCC 651, Raunaq International Ltd. v. I.V.R. Construction Ltd. and Ors. (1999) 1 SCC 492, Air India Limited v. Cochin International Airport Limited (2000) 1 SCR 505, Directorate of Education and Ors. v. Educomp Datamatics Ltd. and Ors. AIR 2004 SC 1962 and Association of Registration Plates v. Union of India (UOI) and Ors. AIR 2005 SC 469

The aforesaid case laws (Supra) were examined and it is noted that Courts in these cases had not given blanket or absolute exemption from judicial scrutiny to such state authorities. The courts have held that the conditions in tender documents or decision to award tender should not be arbitrary, discriminatory or actuated by malice. The Courts, thus, had not imposed any bar on examination of tender conditions, if they are discriminatory in nature. The provisions of Section 4 of the Competition Act, 2002 mandate the Commission to inquire into the cases where dominant players may restrict competition in the market by way of denial of market access and by imposing unfair and discriminatory conditions.

The allegation that the tender was floated to favor Martin Lottery Agency Limited, the DG has concluded on the basis of the documents and statements given by Jupiter Lotteries, Future Gaming Solutions, Sugal and Damani Enterprise and the Government of Goa that this allegation was not found to be true as the investigation found that two bids were received in response to expression of interest issued by Govt. of Goa. Namely: Future Gaming Solutions India Private Limited (earlier Martin Lottery Agency Limited) and the Sugal and Damani Enterprises Private Limited. Both were meeting the turnover and net worth criteria. The bid of Future Gaming Solutions was not accepted at the time of evaluation, considering it non-responsive. Finally, it was Sugal and Damani who was awarded the contract.

Now coming to the question of abuse of dominance by the government of Goa, the DG has examined all factors of dominance stated in Section 19(4) applicable to the facts of the present case. It has been adequately established that the Government of Goa enjoyed the position of dominance, since they are solely engaged in the work of awarding the tender to successful bidder for running Goa Lotteries, which no other enterprise can do so in the territory of Goa. The Government of Goa hold position of dominance in terms of explanation (a) to Section 4 of the Competition Act, 2002 read with Section 19(4) of the act which has been elaborately discussed in the report. It is undoubted that Govt. of Goa has the ability to behave /act independently of the competitive forces prevailing in the relevant market since they have been given exclusive authority to run lotteries under the Lotteries Regulation Act, 1998. In terms of provisions of explanation (a) to Section 4(2) of the Competition Act, 2002 read with Section 19(4) of the act, Government of Goa, certainly enjoys the position of dominance (in fact the only player) in the relevant market of lotteries in Goa under the Goa Brand Lottery Scheme (online and paper lotteries) under the Lotteries (Regulation) Act, 1998 and the Rules made there under. The analysis of the factors, establishes dominance of Government of Goa in its areas of operations in the relevant market of running and conducting Goa Lotteries. Hence after proving dominant position of the enterprise, the report examined all the acts of abuse listed in Section 4(2) of the Act.

However, dominance per se is not bad, but its abuse is bad in Competition Law in India. Abuse is said to occur when an enterprise uses its dominant position in the relevant market in an exclusionary or /and an exploitative manner. Section 4 of the Act gives an exhaustive list of practices that shall constitute abuse of dominant position and, therefore, are prohibited. Abuse of dominance is judged in terms of specified acts committed by a dominant enterprise. Such acts are prohibited under the law. These practices are just prohibited, as an abuse of its dominant position and therefore, the Act does not envisage to explicitly prove such abuse of dominance only when it causes or likely to cause an appreciable adverse effect on competition in the relevant market within India. Rather, any abuse of the type specified in the Act by a dominant firm shall stand prohibited. Once the dominance is established then the Commission shall look into the practices listed in Section 4(2) and if the enterprises are found to be engaged in such practices the abuse of dominant position shall be established since such acts are prohibited under Law.

Further, the DG examined in detail the terms & conditions of the tender documents with the purpose of ascertain as to whether these imposed unfair and discriminatory conditions limiting /denying market access to all other entities; and has the effect of creation of barriers to new entrants and foreclosure of competition by hindering entry into the market. It is noted from the tender documents that only those entities/persons were eligible to participate that fulfilled among others the following conditions: i) Bidder should have a minimum gross turnover of Rs. 4000 crore during the last three financial years. ii) Bidder should have net worth of more than Rs. 40 crore.

The aforesaid conditions placed in the tender documents clearly shows that Government of Goa had set very high eligibility criteria to qualify and participate in the bidding process which is evident from the fact that only two bidders participated in the tender. There has been consternation among other players in the market and therefore while one of the player-Jupiter Gaming filed petition in the Competition Commission of India, while another party -Puja Enterprises filed a writ petition in the High Court of Bombay. These high parameters also have the effect of creating barriers to entry to the smaller players who may be having a turnover of less than Rs. 4000 crore. In case the conditions of minimum turnover of Rs. 4000 crore would not have been there, more number of participants could have participated in the tender process. The entry of more players could have been facilitated by doing away with the high turnover criteria. It is observed that the condition of minimum turnover of Rs. 4000 crore and net worth of Rs. 40 crore stipulated in the tender documents also does not stand justified keeping in consideration the dynamics of the lottery business which involved nothing more than selling of tickets, collection of money and remitting the minimum commitment to the Government of Goa. Thus, such high criteria of turnover and net worth of the bidder could be justified in large civil/construction/infrastructure projects, but certainly not in such low risk business of running lotteries. The Government of Goa also not able to explain and justify the reasons for such criteria in the tender documents. Mr. Anand Sherkhane, Joint Secretary, Govt. of Goa could not give any explanation on this minimum cap of Rs. 4000 crore of turnover as evident from his statement dated 12.07.2010.

Further, it was noticed in the `expression of interest' floated for the purpose, that the State Govt. of Goa was expecting a minimum guaranteed amount of Rs. 12 crore from the operators on a turnover of Rs. 1000 crore and 0.25% over and above the turnover of Rs. 1000 crore. The selected bidders were required to pay to the Govt. of Goa the guaranteed amount, only after collecting money from the people buying lottery tickets. Moreover, the EMD of Rs. 5 crore deposited by the participating and successful bidder was also supposed to be adjusted towards remission of revenues. Thus, even if the turnover criteria of Rs. 4000 crore in the tender documents was to be removed, than it would not have impacted the prospect and revenue of the Government of Goa. But for higher turnover criteria in this case, there would have been enhanced participation, leading to easing out of the entry barriers, facilitating entry of more number of players in the relevant market.

The DG thus concluded that the allegations that Govt. of Goa has abused its dominant position by denying market access to all lottery players stand substantiated as the action of Govt. of Goa in keeping high turnover criteria of Rs. 4000 crore and net worth of Rs. 40 crore has resulted in denial/restriction of market access to the other parties in the relevant market. This action is found to be in contravention to provisions of Section 4(2) (c) of the Competition Act, 2002.

While fully agreeing with the findings of the DG stated as above, I would like to add here that the abuse of a dominant position is another way of interfering with competition in the market place. In simple terms it refers to the conduct of an enterprise that enjoys a `dominant position', as defined by the Act. In substance, `dominant position' means the position of strength enjoyed by an enterprise that enables it to act independently of competitive forces prevailing in the relevant market. Such an enterprise will be in a position to disregard market forces and unilaterally impose trading conditions, fix prices, etc. The abuse may result in the restriction of competition, or the elimination of effective competition.

Sometimes, the statutory power or exclusive right conferred by the State to the enterprises also result in abuse of dominant position. In the case of General Motors Continental NV v. Commission of the European Communities it has been held that the holder of an exclusive right conferred by the State can abuse its dominant position. In this case the charge was a violation of Article 82 by General Motors Continental NV. The infringement was charging an excessive amount as inspection charges, relating to five motor vehicles manufactured in another member state and imported into Belgium, towards checking, for conformity with the specifications contained in the approval certificate prescribed by the Belgian authorities, that General Motors Continental NV had to carry out as the sole authorized did not provide any measures to fix or limit the charge imposed for the service rendered. Dealing with the first issue of whether the activity involved in issue of certificates of conformity would constitute a dominant position, the Court held that the legal monopoly granted to the manufacturer or his agent put them in a dominant position as the service of inspection in Belgium for conformity to specifications could be availed of only on the terms stipulated unilaterally by them. The Court observed that the holder of such an exclusive right could abuse it. 'Such an abuse might lie, inter alia, in the imposition of a price and which has the effect of curbing parallel import by neutralizing the possibly more favorable level of prices applying in other sales area in the community, or by leading to unfair trade in the sense or Article 86(2)(a).' In the present case, the Ministry of Finance was conferred exclusive right to award contract for the lottery operations in the State of Goa and by virtue of that Govt. of Goa had a dominant position and by putting discriminatory conditions the Govt. of Goa has abused its dominant position.

The Govt. of Goa also cannot take the pretext of discharging sovereign functions. There is a clear distinction between the sovereign functions and commercial functions. In the case of Govt. of Goa the lottery operation is a commercial function as the State Govt. has entered into a business of commercial matters and thus well covered under Section 2(x) read with Section 2(u) of the Act.

The Anti-trust Laws all over the world focus both on multilateral activity and unilateral activity i.e. abuse of dominant position in the market. Any form of monopolization or attempts to monopolize is prohibited under the Anti-trust Laws. In US the offence of abuse of dominant position is included within the phrase 'monopolization or attempt to monopolize' as mentioned in Section 2 of the Sherman Act. Monopolization has two elements i) the possession of monopoly power and ii) the willful acquisition or maintenance if that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident. It has been held in the case Aspen Skiing Co. Aspen Highlands Skiing Corpn. 472 US 585 (1985) that the intent of the person is relevant to the analysis as to whether the conduct is exclusionary or predatory. Article 82 of the treaty of the EC enumerates following as being abuse of dominant position; unfair prices or conditions, limiting production, markets or technical development, applying dissimilar conditions to equivalent transactions and making contracts subject to supplementary obligations having no connection with the subject of the contracts. That the conduct would be found exclusionary on the examination of the action of the undertaking concern in the light of the consumer interest i.e. as to whether it has impaired competition in an unnecessary restrictive way. Thus, the analysis should reveal if the result of the conduct indicted as abusive is the restriction or elimination of competition in the relevant market, for the goods or services in question. Competition Laws prohibit all those behavior which damage true competition between firms and exploit consumers. In the present case the action of Govt. of Goa in keeping high turnover and net worth has resulted in restriction and elimination of competition in the relevant market for the goods or services in question and thus its action is found to be in contravention to the provisions of Section 4(2) (a) (b) & (c) of the Competition Act, 2002.

The next issue in question was were there any collusive bidding/ bid rigging on the part of M/s Martin Lottery Agency Limited (now Future Gaming Pvt. Ltd.), Jupiter Gaming, M/s Sugal and Damani Pvt. Ltd and other enterprises in terms of provisions to Section 3(3) (d) of the Act? The DG during the course of investigation found certain intriguing and surprising sequence of events and facts which points to the possibilities of bid manipulations. DG has highlighted these events as under:

i) The enquiries had revealed that a total of nine bid documents were purchased between 11.3.2010 to 25.3.2010 as per records of Govt. of Goa and the details of which are given in Chart on page 40 of the report. It was noticed that the proposal form of bid in the name of Kwik win gaming solutions, Tashi Delek gaming solutions were purchased by one Mr. Harish as evident from the signature of the Register. These two entities therefore, appear to be front companies of Jupiter Gaming Pvt. Ltd. which in turn is inter-related to Zee Essel Group as apparent from Exhibit-7 of the report. Similarly, the three forms of in the case of Sugal & Damani Enterprise, Swagat Business Pvt. Ltd. and Skill Lotto Solutions have been purchased by the same person and therefore, these enterprises appear to be closely related. Lastly, the forms of Krishna Agencies and MJ Associates have been purchased by the same person. Thus, the purchase of forms appears to have been made in the name of front companies belonging to the main players in the business of lottery.

ii) The proposal both for the technical and financial bids were supplied on a printed forms containing a unique number and stamp of Joint Secretary, Govt. of Goa after payment of a deposit of Rs. 25,000 for each form. This has been confirmed by the Joint Secretary (Budget), Govt. of Goa in his statement dated 12.7.2010.

iii) The bid documents of Sugal & Damani were submitted in the pre-printed bid forms containing proposal form No. FIN-BUD/Lot/2010/0004 on both technical as well as financial proposal. However, the bid document of Future Gaming Pvt. Ltd. was submitted on a separate stationary which did not contain the stamp of the Joint Secretary and the unique number (not pre-printed bid form). The said typed bid document contained form No. FIN-BUG/2010/0001 dated 3.4.2010 for the technical proposal and No. FIN-BUG/2010/0007 dated 3.4.2010 for the financial proposal. Further, the said financial proposal form also had an insertion of additional condition written in hand with ink stating: "The 0.25% mentioned on their additional turnover exceeding Rs. 1000 crores is subject to negotiation." (As per affidavit dated 5.7.2010 given in confidential cover). The bid proposal of Future Gaming was rejected primarily on this ground of inserting additional condition in the bid document.

iv) However, it was noticed that the copies of the bid document submitted by Future Gaming Pvt. Ltd. earlier to this office vide affidavit dated 20.5.2010 (confidential) were on the pre-printed stationary containing the unique number -FIN-BUG/2010/0001 dated 3.4.2010 both on the technical and financial proposal. The said bid document also did not have any additional condition or alteration made in ink.

v) Thus, two sets of bid documents were submitted to this office on two different dates as mentioned above. The Future Gaming had explained the discrepancy by stating that they had inserted the additional clause with ink in the bid document at the time of submission the same before the Govt. of Goa.

vi) Further, bid documents of all the parties was also submitted by the Govt. of Goa vide letter dated 15.7.2010 (Exhibit-9). The examination of the bid document pertaining to Future Gaming Pvt. Ltd. as submitted by the concerned party and the Govt. of Goa showed several differences in the bid documents which have been highlighted in the Table given on page 44 of the report.

vii) The original bid document of Future Gaming Pvt. Ltd. submitted by the Govt. of Goa revealed some startling and unusual facts which deserves attention of the Commission. The examination of the said original bid document showed that it was on a separate stationary which did not bear the stamp of the Joint Secretary and the date was written as "3rd April, 2010" after using whitener. The back of the page shows the date as 15.3.2010. In other words, the original date of 15.3.2010 was changed to 3rd April, 2010 by using the whitener. Further, the typed technical proposal contained No. FIN-BUG/2010/0001 and the financial proposal contained the No. FIN-BUG/2010/0007 dated 3.4.2010. Thus, the form number of the technical bid did not match with the financial bid in this case.

viii) It was also noticed that as per the laid down procedure, all the bids in sealed cover had to be dropped in a sealed box in the office of Govt. of Goa. However, in the case of Future Gaming Solutions Pvt. Ltd. it was noticed that the Govt. of Goa obtained signature of two persons indicating the date and time of receipt of the bid proposal as exception to the normal procedure. This appears to have done to create an evidence for the existence and receipt of non-printed typed bid form containing additional condition put in ink.

ix) The aforesaid anomalies/discrepancies were confronted to both the Govt. of Goa and Future Gaming Solution Pvt. Ltd. but no satisfactory explanation could be furnished by them. As a matter of fact the Joint Secretary in his statement dated 12.7.2010 has stated that the anomalies/errors in the bid document of Future Gaming Solution Pvt. Ltd. were omitted to have been noticed by the Tender Evaluation Committee.

The aforesaid sequence of events, discrepancies in the set of tender documents of Future Gaming Pvt. Ltd., insertion of additional condition by hand in ink in the financial bid document, change in date of the bid proposal by using whitener, and non-satisfactory explanation by the Govt. of Goa and the target party, raises valid suspicion to the whole -bidding process in this case. The most pertinent question that arises is as to why Future Gaming Solutions Pvt. Ltd. had inserted additional condition by hand in ink in the financial proposal document just before submitting the bid, despite realizing that such "conditional bid" are liable for rejection. Similarly, why didn't the Tender Evaluation Committee of Govt. of Goa did not raise objection to the non-printed typed tender form of Future Gaming Solutions Pvt. Ltd. at the time of opening the bid on 8.4.2010. Further, why no specific representation by way of letter or statement was made by Future Gaming Solutions Pvt. Ltd. at the time of opening of the bid. The minutes of the Tender Evaluation Committee dated 8.4.2010 and 16.4.2010 does not find any mention of such notice of discrepancies (Exhibit-10). It is relevant to mention here that a so called representation to the Govt. of Goa was made on 18.5.2010, only after receipt of notice from this office seeking explanation on their rejection of proposal. It is also not explained satisfactorily as to why Future Gaming Solutions Pvt. Ltd. did not fill up the bids in the pre-printed proposal form containing unique number and stamp of Joint Secretary. Similarly, why and how typed forms without stamp were accepted by the Govt. of Goa with total disregard to the security and validity of such printed forms. At the same time why and how the Tender Evaluation Committee failed to take note on the discrepancies with respect to the two different numbers on technical and financial proposals as also the change made in the date of the form as 3rd April, 2010 by using whitener, whereas the proposal form contained the date as 15.3.2010.

All the facts and circumstances, emanating from the sequence of events and suspicious conduct of Future Gaming Solutions Pvt. Ltd. point towards the possibilities of some kind of tacit understanding with the other bidder -Sugal & Damani who were finally awarded the bid contract. The investigation has also tried to examine the possible financial motive of such act of Future Gaming Solutions Pvt. Ltd in the whole bidding process. The perusal of the terms and conditions of the bid design of the Goa lotteries shows that it could have appointed more number of parties instead of one as successful bidder, since there was no requirement of appointing only one distributor. This issue was also deliberated in the meeting of the Tender Evaluation Committee dated 16.4.2010. The bid design of the Govt. of Goa stated that the successful bidder had to pay Rs. 12 crores as minimum guarantee for turnover exceeding Rs. 1000 crores and 0.25% on additional amount over and above Rs. 1000 crores. Therefore, considering the fact that both the parties: (i) Sugal & Damani (ii) Future Gaming Solutions Pvt. Ltd. met all the requirements of the expression of interest including the minimum gross turnover of Rs. 4000 crores per annum and net worth of Rs. 40 crores, were eligible to be appointed as distributors. Therefore, if the appointment of two bidders were to be made, it would have resulted in earning income of Rs. 24 crores to the Govt. of Goa. Therefore, by putting additional condition in the financial bid in ink by Future Gaming Solutions Pvt. Ltd. and thereby making it liable for rejection so that only one party is awarded the contract has clearly financial motive hidden to it. Thus, by rejection of bid of Future Gaming Solutions Pvt. Ltd. on technical reasons and thereby appointment of one party, namely, Sugal & Damani, the Govt. of Goa was eligible to an income of Rs. 14.5 crores as against Rs. 24 crores if two parties were to be awarded the contract. Comparative analysis of such equation has been given on page 49 of the DG's report. In other words, it was more beneficial for bidders if they decided to sit together, formulate a strategy and try to ensure that only one party gets contract, instead of two. It appears that Future Gaming initially filled up the printed form as procured from Govt. of Goa. However, on re-consideration, possibly after holding discussions with Sugal and Damani Group, it submitted another bid and inserted additional conditions which made its bid liable for rejection. Thus resorting to such modus operandi, the guarantee money liable to be paid by the second party was avoided and to be shared beneficially by the two concerns. This equation appears to be the real motive, since the lottery business of Future Gaming is not likely to be hampered because as per the terms of the agreement with Government of Goa, M/s. Sugal and Damani could engage sub-agents/retailers. Thus, it appeared to be a case of collusive transaction of bid manipulation by the parties wherein the Government of Goa was made to lose substantial revenue which in turn was shared by the two parties.

In the light of several discrepancies in the set of tender documents of Future Gaming Pvt. Ltd; insertion of additional condition in the financial bid document by hand in ink; change in date of the bid proposal by using whitener; financial motive and loss to revenue to Government of Goa, and non-satisfactory explanation by the Govt. of Goa and the target party; the investigation report has concluded that Bid Rigging in the form of Complementary Bidding or Cover Bidding had taken place in this case. It is a form of price fixing and market allocation, often practiced, where contracts are determined by a call for bids. Bid-rigging almost always results in economic harm to the agency which is seeking the bids, and to the public, who ultimately bear the costs as taxpayers or consumers.

Complementary bidding, or cover bidding, is a form of bid rigging where some of the bidders bid an amount knowing that it is too high or contains conditions that they know would be unacceptable to the agency calling for the bids. In the instant case, the agreement dated 06.05.2010, between Govt. of Goa and Sugal and Damani permits the latter to engage agents. Thus, a possibility of some kind of understanding between Sugal and Damani and Future Gaming group by which Future Gaming or its allied concerns may get share of business of Goa Lotteries from Sugal and Damani cannot be ruled out. The statement of Mr. Naresh Mangal, Director of Sugal and Damani Enterprises Private Limited (Annexure-E) suggest that there is no problem between the three major players in the business of lottery and they independently continue to sell tickets of all State Government including Government of Goa. This said statement therefore, shows that there is some sort of cooperation between all three -Sugal and Damani, Future Gaming and Essel group, with respect to business of lottery operations of the State Govt. of Goa. Further, from the statement of Jagesh Dhamija of Future Gaming Solutions Private Limited and statement of Naresh Mangal, Director of Sugal and Damani Enterprises Private Limited, it is clear that the three main players are working together or have their respective territories. Thus, there could be incentive for them to allocate market for themselves.

Bid Rigging has been defined in Explanation to Section 3, Sub-section (3) of the Competition Act, 2002 which reads as follows:

any agreement, between enterprises or persons referred to in Sub-section (3) engaged in identical or similar production or trading of goods or provision of services, which has the effect of eliminating or reducing competition for bids or adversely affecting or manipulating the process for bidding.

The agreement in Competition Act need not be in writing only; it can be oral as well. Further, any understanding or action is also covered as an agreement for the purposes of Competition Act. Thus, the objective of securing the most favorable prices and conditions may be negated if the prospective bidders collude or act in concert. Such bid rigging contravenes the very purpose of inviting tenders and is inherently anti-competitive.

It may be relevant to mention here that Bid rigging is difficult to detect since it is executed in secrecy with only the participants privy to the scheme of conspiracy. Therefore, its detection can be made only by way of assessing the suspicious conduct, patterns of abnormal activities in the bidding process, exception to the normal procedures and loss to the Government Department. There are number of situations of suspicious behavior of Future Gaming and other parties which clearly point out towards bid rigging in this case. In this case, it prima-facie appears that additional conditions in ink had been inserted by Future Gaming to make its bid liable for rejection and thereby resorting to mechanism of cover bidding. This finding in the investigation report draws support from the fact that M/S Future Gaming did not raise any objection to the technical rejection of its bid before the Govt. of Goa, until such time a notice was issued by this office. Further it appears that Future Gaming had accepted the rejection of its bid without any serious challenge since it has not contested for any review of the decision of Government of Goa or filed a case in Court of Law.

The existence of bid rigging in the aforesaid case also finds support from OECD guidelines which suggest certain factors which facilitate efforts of bid rigging namely: i) Bid rigging is more likely to occur when a small number of companies supply the good or service. The number of players in lottery business is very limited and thus it was easier for these parties to reach a collusive agreement. ii) When few businesses have recently entered or are likely to enter a market because it is costly, hard or slow to enter, firms in that market are protected from the competitive pressure of potential new entrants. The protective barrier helps support collusive actions. The bid design of Govt. of Goa calling for higher threshold of turnover and net worth has facilitated this transaction. iii) When the products or services that individuals or companies sell are identical or very similar, it is easier for firms to reach an agreement on a common strategy. The two companies which have submitted tender bids for lottery are definitely engaged in identical products or services. Therefore, all the factors enumerated by the OECD are applicable to the fact of the case to suggest bid rigging by the concerned parties. Thus, after considering all circumstantial evidence, manipulations in the bid documents, behavior of the parties, it is concluded that bid rigging in the form of cover bidding had taken place in this case in violation to Section 3(3) (d) of the Competition Act.

The finding in the investigation report also draws strength from the case of Detacher Lotto -und Toto block's of the German lottery, wherein the Higher Regional Court in Düsseldorf held that the agreement between the lottery operators to restrict the operations in their given territories was a cartel and hence anti-competitive in violation to the German and European Laws. This shows that lottery business has come under scanner for their cartel like behavior in other international jurisdictions and therefore makes a strong argument of bid rigging which is anti-competitive in nature in contravention to provision of Section 3(3) (d) of the Act.

Finally, the DG concluded that on the basis of the investigation, available record and other circumstantial evidences, the existence of bid rigging in the awarding of the distributor contract of Goa lotteries cannot be denied. The evidences in the form of discrepancies in the tender documents of Future Gaming Pvt. Ltd; insertion of additional condition in the financial bid document by hand in ink; change in date of the bid proposal by using whitener; financial motive and loss to revenue to Government of Goa, and statements of the concerned parties clearly suggest of some sort of tacit understanding/agreement wherein Future Gaming Solutions was made to file a defective bid so that contract could be awarded to Sugal & Damani and thereby the evasion of commitment money to the govt. of ' Goa could be shared between them. Further, the poor manner in which Jupiter Gaming Pvt. Ltd. has pursued its information before this office and subsequent withdrawal of such information also suggests that this party associated with Zee Essel Group may also have entered in to some kind of understanding in the whole bidding process in this case. The possible justification for this Act could be possibly of combined financial gain. Technically, there was no requirement of having a single distributor. However, in case a single party was given the contract, it would have to pay GoG only Rs. 4.5 crores whereas if two parties were given the contract then the combined payment would have been Rs. 24 crores. Thus, there was ample justification for one party to withdraw deliberately one the understanding that the money saved would result in some benefit to the other party at some later stage.

Before reaching any conclusion I would like to focus here on the harmful effect of bid-rigging/collusive bidding. Public procurement is a key economic activity of governments, accounting for a large proportion of Gross Domestic Product worldwide. Effective public procurement avoids mismanagement and waste of public funds. Reducing collusion in public procurement requires strict enforcement of competition laws. It is a known fact that corruption is rampant in Public Procurement. According to the OECD corruption arises in procurement when the agent of the procurer in charge of the procurement is influenced to design the procurement process of alter the outcome of the process in order to favor a particular firm in exchange for bribes or other rewards. Public procurement policy therefore has to be particularly careful to avoid instances where corruption may occur. Corruption of public officials is not just a regrettable thing as such, but it has an impact on the efficient allocation of procurement. By definition, corruption in procurement involves an allocation of contracts which is not the same as that that would have been obtained through the competitive process. Corruption either leads to the allocation of the contract to a firm which was not the bidder with the lowest price but rather to the firm who has offered the bribe. In this sense, corruption in public procurement implies a distortion of competition. Thus the fights against corruption and anti-competitive practices are highly complementary policies. In practice, therefore, there are trade-offs between enhancing competition and the desire to minimize collusion.

Governments devote a large share of taxpayers' money to public procurement - purchasing goods and services from road building to school textbooks. But how can they be sure that they are getting good value for money and those companies seeking public contracts are not conspiring to undermine the principle of competitive bidding. The primary objective of an effective procurement policy is to promote efficiency - in other words, to ensure that the supplier offering the lowest price or, more generally, the best "value for money" is awarded the contract. Effective public procurement avoids mismanagement and waste of public funds. It is therefore important that the procurement process is not affected by practices such as collusion, bid-rigging, fraud and corruption.

Anticompetitive conducts affecting the outcome of the procurement process is a particularly pernicious violation of competition law. Through bid-rigging practices, the price paid by public administration for goods or services is artificially raised, forcing the public sector to pay above market rates. These practices have a direct and immediate impact on public expenditure and therefore on taxpayers' resources.

In the light of above discussions and the findings of DG based on sufficient material, there is no doubt that there was collusion among the prospective bidders. Even the involvement of the Informant cannot be ruled out. The purpose and the motive on the part of the bidders are obvious. So far the involvement of the Govt. of Goa in the entire tendering process is concerned, the ultimate loser in this entire process is the Government of Goa which was made to lose substantial revenue by unscrupulous bidders such as M/s Martin Lottery Agency Limited (now Future Gaming Pvt. Ltd.), Jupiter Gaming, M/s Sugal and Damani Pvt. Ltd and other enterprises as mentioned in the DG's report. As a consequence the State of Goa did not get the actual value for money.

Thus, I fully agree with the conclusion arrived at by the DG that the action of Govt. of Goa in keeping high turnover and net worth has resulted in restriction and elimination of competition in the relevant market for the goods or services in question. I, therefore, hold that the action of the Government of Goa is found to be in contravention to the provisions of Section 4(2) (a) (b) & (c) of the Competition Act, 2002.

I further hold, on the basis of the facts and circumstances of the case, that there was collusion on the part of the bidders in rigging the bid within the meaning of Section 3(3) (d) of the Competition Act as their action in concert has created an appreciable effect on competition.

Having clearly concluded that the action of the Government of Goa is in contravention to the provisions of Section 4(2) (a) (b) & (c) of the Competition Act, 2002 and there was collusion on the part of the bidders in rigging the bid within the meaning of Section 3(3) (d) of the Competition Act, and also keeping in view the overall object of the Act and its legislative intent i.e. to protect the interest of the consumers, to promote and sustain competition in the market and to ensure freedom of trade carried on by other participants in the relevant market, I am of the considered opinion that this is a fit case where following directions under Section 27 of the Act need to be issued:

The present agreement with M/s Sugal & Damani be annulled forthwith and fresh tendering process be initiated by the Government of Goa in a fair and transparent manner to avoid any bid-rigging/ collusive bidding as the entire process of handling, documentation and evaluation of the technical and financial bid, in the present case, was carried out by the Government of Goa in such a manner which resulted in collusive bidding/bid-rigging by different enterprises and as a result the Govt. of Goa did not get its value for money.

The Government of Goa is also directed to refrain from putting unfair and discriminatory conditions in floating a tender in future which served as barriers to new entrants in the market, driving existing competitors out of the market and restricted/eliminated competition in the market.