CCI Dismisses Complaint against Directorate of State Lotteries, West Bengal

On May 11, 2020, the CCI dismissed a complaint alleging contravention of Sections 3 and 4 of the Act against Directorate of State Lotteries, West Bengal (‘OP1’) and the West Bengal Lottery Stockists Syndicate Private Limited (‘OP2’), filed by Mr. XYZ (‘Informant’). OP1 is established under the Finance Department of West Bengal and organises, promotes and conducts lotteries on behalf of the Government of West Bengal. OP2 is a private company which has been the sole and exclusive distributor of paper lotteries in West Bengal since 2014, as appointed by OP1[1].

As per the Informant, the arrangement between OP1 and OP2 allowed OP2 to purchase lotteries from OP1 at a discount to the exclusion of the general public and other stockists, after which OP2 was free to sell the paper lotteries at face value. The Informant alleged that this arrangement was in the form of an exclusive distribution arrangement in violation of the Act. The Informant further alleged that by appointing OP2 as the exclusive distributor, OP1 was abusing its dominance by denying market access to other competitors involved in the business of lotteries.

The CCI took the view that “lotteries” would be considered as “goods” under the Act and that OP1’s activity i.e. appointment of distributors for marketing and sale of State lotteries fell within the definition of “service” under the Act. The CCI then noted that OP1 would be considered as an “enterprise” under the Act despite being a Department of the Government, since it was not engaged in any activity relating to the sovereign functions of the Government.

The CCI noted that OP2 was initially appointed as a sole distributor for a period of three years, and that in 2018, OP1 had taken a policy decision to award tender for distribution for sale of lottery tickets, and that the tenure of OP2 as the sole distributor kept getting extended due to the inability of OP1 to carry out a tender process due to a multitude of reasons. The CCI also noted that the tendering process for selecting a distributor of State lotteries in West Bengal was to be initiated soon. Thus, the CCI was of the opinion that no case of contravention of the Act was made out against the OPs and dismissed the complaint. The CCI also directed OP1 to file a status report within one week of the completion of the tendering process.

[1] XYZ v. Directorate of Sate Lotteries, West Bengal & Ors., Case No. 28 0f 2019, order delivered on 11 May 2020.

Published In:Inter Alia Special Edition - Competition Law - June 2020 [ English
Date: June 10, 2020