No Unfair Competitive Practices: Competition Commission Closes Case Against 6 Governmental Organisations, Citing No Contravention Of The Competition Act

The case was filed by the Informant against the Director General, CPWD, Headquarters (OP-1), Managing Director, National Capital Region Transport Corporation (OP-2), Engineer Member, Delhi Development Authority (OP-3), Chief Engineer, Public Health Engineering Department, Government of Madhya Pradesh (OP-4), Engineer in Chief, Water Resources Department, Government of Madhya Pradesh (OP-5), Chairperson, Madhya Pradesh Police Housing and Infrastructure Development Corporation Ltd. (OP-6).

Brief Facts:

The Informant, the owner of Venus Testing and Research Laboratory, provides engineering material testing services. This laboratory holds accreditation from the International Organization for Standardization (ISO).

The Informant highlighted that if a laboratory seeks accreditation under ISO for testing and calibration activities, it should choose an accreditation body operating in accordance with ISO/IEC 17011. He further added that there are no stipulations or regulations from the Bureau of Indian Standards or any authorized body mandating accreditation from a specific entity. However, he claimed that the Opposite Parties impose conditions via circulars or tender clauses, requiring the use of laboratories accredited by the National Accreditation Board for Testing and Calibration Laboratories (NABL).

The Informant contended that this practice creates an unfair competitive landscape favoring NABL, leading to an appreciable adverse effect on competition. Such practices allegedly establish entry barriers for new participants and could force existing players in the market to cease operations.

Contentions of the Informant:

Drawing from previous rulings by CCI, the Informant argued that each of the state and central authorities, the Opposite Parties fits the definition of an "enterprise" under Section 2(h) of the Act. Moreover, he claimed that these enterprises hold dominance in their respective relevant markets, which correspond to the tasks allocated to them, and their geographical markets align with their territorial jurisdiction.

For OP-1, he established that the relevant market is "procurement of laboratory testing services for materials used in road and bridge construction in India” and argued that its dominance was determined in the said order.

He argued that for OP-2, the relevant market is "procurement of laboratory testing services for materials used in the Regional Rapid Transit System project across the National Capital Region” and asserted that it holds dominance to its exclusive authorization for such project.

For OP-3, he argued that procurement of laboratory testing services for materials used in Delhi's development is its relevant market and its unparalleled role in Delhi's development establishes its dominance.

The Informant contended that OP-4's relevant market is "procurement of laboratory testing services for materials used in the drinking water scheme in Madhya Pradesh” and the sole executing department for water supply schemes in the state is its dominance.

For OP-5, the relevant market pertains to the "procurement of laboratory testing services for materials used in water resources projects for irrigation in Madhya Pradesh." The Informant asserted that OP-5's dominance results from its exclusive role in implementing irrigation projects in the state.

Regarding OP-6, the relevant market includes the "procurement of laboratory testing services for materials used in constructing police stations and residences for police officials in Madhya Pradesh." The Informant noted that OP-6 is the only entity responsible for these constructions in the state.

The Informant claims that NABL and the opposite parties operate at different production chain levels. He argued that the conditions favoring NABL and imposed by the dominant enterprises violate provisions of the Act, specifically, Section 3(4) read with Section 3(1). Additionally, the Informant contended that the conditions set by the dominant enterprises contravene sections 4(2)(a)(i), 4(2)(b), and 4(2)(c) of the Act.

Observations of the Commission:

The CCI closed the case and held that there are no violations of Section 3(4) and Section 4 of the Act. The Commission pointed out that, for the examination of contravention of Section 3(4) of the Act, the existence of an agreement between the parties is sine qua. However, the Informant failed to provide substantial evidence indicating any exclusive arrangement between the OPs and NABL. Additionally, the majority of Opposite Parties had independently framed the terms and conditions in their Tenders, Notices, Guidelines, Expression of Interest, etc., making it difficult to infer NABL's involvement or preference in such decisions.

Further on the contravention of Section 4 of the Act, it observed that the market for laboratory testing services was not predominantly dependent on works from the Opposite Parties. These services were needed by various entities, extending beyond the Opposite Parties in a given geographic area. As a result, it is not possible to establish the dominance of all Opposite Parties in their respective markets. Therefore, assessing the dominance of each Opposite Party individually within their specific market contexts might not be appropriate.

The Commission while acknowledging the autonomy of procurers in selecting goods and services, emphasized that this autonomy should be subject to the relevant procurement rules and compliance with the Act. Entities seeking procurement must consider their market position and the products or services they intend to acquire. Discriminatory or unfair practices should be avoided during this process.

In conclusion, the Commission reiterated that to promote healthy competition, procurers should focus on specifying desired standards for suppliers of goods and services rather than naming or nominating specific entities.

Case Title: Prem Prakash vs. Director General, CPWD, HQ, New Delhi & Ors.

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