Whether lottery business will come within purview of competition Act 2002?

State of Mizoram & Anr. vs. CCI
(Gauhati HC, 16.08.2014)

The Competition Act, 2002 aims to prevent practices having adverse effect on competition to promote and sustain competition in market. It also aims to protect the interest of the consumer and to ensure freedom of trade carried on by the participants in the market.

The first issue that arose for consideration was whether lotteries can be considered as a trade under the Competition Act, 2002? The Court observed that under the Lotteries Regulation Act of 1998, lottery has been defined as a scheme for distribution of prizes by lots or chance to those persons participating in the chances of a prize by purchasing tickets. Unlike any other trade and commerce, the business of lottery is being governed strictly in terms of the Act of 1998 and the Regulations and Rules framed thereunder.

As the Supreme Court also on the difference between gambling and trade had held earlier that gambling inherently contains a chance with no skill, while trade contains skill with no chance and even in the State Lotteries the same element of chance remains with no skill and therefore it remains within the realm of gambling and the same would not be a trade in any case, would not qualify to be 'trade and commerce' as used in Article 301. Lotteries organized by the State is also gambling in nature and cannot be construed to be a trade and commerce within the meaning of Articles 301 to 303 of the Constitution of India.

A lottery ticket has no value in itself. The sale of lottery ticket does not necessarily involve the sale of goods and on purchasing a lottery ticket, the purchaser would have a right to claim to a conditional interest in the prize money which is not in the purchaser's possession. The right would fall squarely within the definition of an actionable claim and would therefore be excluded from the definition of 'goods' under the Sale of Goods Act and the sales tax statutes.

Lottery is gambling. Thus, holding of lottery being gambling, comes within the purview of the doctrine of res extra commercium. Organizing lottery by the State is tolerated being an economic activity on its part so as to enable it to raise revenue and that raising of revenue by the State, by itself cannot amount to rendition of any service.
Under the Competition Act, 'goods' has been defined as goods defined in the Sale of Goods Act, 1930 and includes - (A) products manufactured, processed or mined; (B) debentures, stocks and shares after allotment; (C) in relation to goods supplied, distributed or controlled in India, goods imported into India.

'Service' has been defined as 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, chits fund, real estate, transport, storage, material treatment, processing, supply of electrical and other energy, boarding, lodging, entertainment, amusement, construction, repair, conveying of news or information and advertising.

'Trade' has also been defined as any trade, business, industry, profession or occupation relating to the production, supply, distribution, storage or control of goods and includes the provision of any service.

Competition Act would be applicable to legitimate trade and goods to ensure competition in the market, to protect the interest of the consumers and freedom of trade in markets which are res commercium. The lottery business being gambling and falling within the purview of the doctrine of res extra commercium and not qualifying in the normal parlance of trade and commerce would therefore not come within the purview of the Act of 2002. This being the position, the CCI would have no jurisdiction to entertain the information/complaint.