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India – CCI Refrains From Initiating An Investigation Against The Government Of Haryana’s Public Works Department.

16 February, 2015

 


On January 12, 2015, CCI refused to initiate action against the Public Works Department of the State of Haryana (‘HPWD’), on a complaint filed by a private contractor accusing the HPWD of having abused its dominant position while tendering for and executing road related construction contracts.

While the decision to initiate an investigation or not is a purely merit based concern, the decision of CCI in this case seemed unusual specifically because of its narrow interpretation of the term “enterprise” under Section 2 (h) of the Competition Act, that it applied to HPWD. On the facts, what resonates from the majority decision of CCI is that the HPWD was excluded from the definition of the term enterprise, on account of the fact that it did not engage in any “economic and commercial activity”, since its primary role was to provide infrastructural facilities to the public without having any commercial consideration of its own. As a result, since HPWD did not constitute an enterprise within the meaning prescribed under the statute, CCI held that an allegation under Section 4 of the Competition Act, which states that “no enterprise or group shall abuse its dominant position”, could not be upheld.

On the other hand, the dissenting opinion, passed by member of CCI, Mr. Augustine Peter, laid down three thresholds that ought to have been considered, while determining whether or not the function performed by the HPWD brought it within the purview of the term ‘enterprise’. Amongst other things, the primary objection that was sought to be raised in the dissenting opinion was the incongruity posed by the majority decision, regarding the narrow applicationof the term ‘enterprise’ in the context of government departments. In this regard, Mr. Peter noted that ‘merely because government departments do not have a profit motive even if they are engaged “in any activity, relating to the production, storage, supply, distribution, acquisition or control of articles or goods or the provision of services”, this does not mean that such activity is not “economic” in nature. As such, even government departments such as the HPWD would constitute an enterprise, and therefore, its activities would be caught by the Act.

While it would appear from previous decisions of CCI, including its recent decision in the Coal India case, that it is keen not to project that government departments are insulated from competition scrutiny, this decision certainly deviates from its earlier view.

AZB 

For further information, please contact:

 

Zia Mody, AZB & Partners
[email protected]

 

Abhijit Joshi, AZB & Partners 
[email protected]

Shuva Mandal, AZB & Partners 
[email protected]

 

Samir Gandhi, AZB & Partners
[email protected]

Percy Billimoria, AZB & Partners 
[email protected]

 

Aditya Bhat, AZB & Partners 
[email protected]

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