| Date | Version | May 01, 2023 | 2.0 |
| Keywords | ‘E-market place’, ‘Central Government’, ‘Competition Law’, ‘Supreme Court of India’. |
| List of Legislation Referred |
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| Jurisdiction | Republic of India |
Introduction
The Indian Government has been actively promoting the use of its online procurement portal, the Government e-Marketplace (GeM), as a means to promote transparency, efficiency, and cost savings in public procurement.
To further encourage the use of GeM, the government has made it mandatory in certain situations, for all Central Government Departments and Public Sector Undertakings to procure goods and services through GeM.
While the mandatory use of GeM has many potential benefits, it has also raised concerns among some stakeholders, particularly with respect to its potential impact on competition in public procurement markets.
The mandatory use of GeM has raised concerns among some stakeholders with respect to its impact on competition in public procurement markets.
One of the main concerns is that the mandatory use of GeM could create a monopoly in the public procurement market, with the government as the sole buyer, and thereby limit competition.
This article gives a perspective on the relationship between the mandatory use of GeM and competition law in India.
Legal Framework
Rule 149 of the General Financial Rules, 2017 (GFRs)
The GFRs are a compilation of rules and orders of the Government of India to be followed while dealing with matters involving public finances.
These rules and orders are treated as executive instructions to be observed as specified in the GFRs.
GFRs are issued by the Government of India in furtherance of the powers granted under the Delegation of Financial Powers Rules 1978 (DFPR).
Rule 149 of the GFRs
DGS&D or any other agency authorized by the Government will host GeM for common use Goods and Services.
DGS&D will ensure adequate publicity including periodic advertisement of the items to be procured through GeM for the prospective suppliers.
The Procurement of Goods and Services by Ministries or Departments will be mandatory for Goods or Services available on GeM.
The credentials of suppliers on GeM shall be certified by DGS&D.
The procuring authorities will certify the reasonability of rates.
The GeM portal shall be utilized by the Government buyers for direct online purchases.
GFRs are an exercise of executive powers of the Government of India.
The Central Government has deployed measures to apply Rule 149 of the GFRs to the central public sector undertakings (CPSUs).
Section 60 of the Competition Act, 2002
Act to have an overriding effect.
“The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force.”
The Competition Act does not define ‘law’.
Therefore, the general meaning of ‘law’ is imported and applied in this context.
“Law” includes any Ordinance, order, bye-law, rule, regulation, notification, custom or usage having in the territory of India the force of law.
Thus, Rule 149 of GFRs would qualify as ‘law’.
Examining Anti-Competitive Implications
Section 4 of the Competition Act is examined to see if it can be given effect in the face of Rule 149.
Section 4(1) of the Competition Act states that:
“No enterprise or group shall abuse its dominant position.”
Section 2(h) of the Competition Act defines an “enterprise”.
“Enterprise” means a person or a department of the Government engaged in activities relating to production, storage, supply, distribution, acquisition or control of goods or provision of services.
The GeM Special Public Vehicle (GeM SPV) formed under Rule 149 of the GFRs would fall within the meaning of an ‘enterprise’ under Section 2(h).
The GeM SPV is constituted as a charitable company under Section 8 of the Companies Act, 2013.
Decided Cases for ‘Enterprise’
| S.No. | Case | Court / Bench | Relevant Paras |
| 1 | CCI v Co-Ordination Committee of Artist and Technicians | Supreme Court of India | Para 40 |
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Findings of Court The notion of enterprise is a relative one. Any entity, regardless of its form, constitutes an enterprise when it engages in economic activity. |
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| 2 | Rajat Verma v Haryana Public Works Department | Competition Commission of India | Para 8 |
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Findings of Court Government departments engaged in construction, repair, storage, supply or services fall within the definition of “enterprise”. |
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By virtue of Government directives to Government Departments and measures adopted in respect of CPSUs, GeM SPV is placed in a dominant position because it operates independent of other e-tendering and reverse auction platforms.
“Dominant position” means a position of strength enjoyed by an enterprise in the relevant market in India, enabling it to operate independently of competitive forces prevailing in the market.
Section 4(2)(c) of the Competition Act states that there shall be an abuse of dominant position if an enterprise indulges in practices resulting in denial of market access.
By virtue of Rule 149, GeM SPV may end up abusing its dominant position, which is prohibited under Section 4(1) of the Competition Act.
Decided Cases for ‘Denial of Market Access’
| S.No. | Case | Court / Bench | Relevant Paras |
| 1 | Reliance Big Entertainment Limited and Ors. Vs. Karnataka Film Chamber of Commerce and Ors. | Competition Commission of India | Para 26, 28 & 29 |
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Findings of Court Boycotting films and limiting their release amounted to denial of market access and discriminatory conduct under Section 4(2)(c) of the Competition Act. |
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| 2 | Umar Javeed and Ors. Vs. Google LLC and Ors. | Competition Commission of India | Para 232 |
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Findings of Court Google perpetuated its dominant position resulting in denial of market access for competing search applications. |
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| 3 | Hemant Sharma & Others vs All India Chess Federation | Competition Commission of India | – |
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Findings of Court Restrictions imposed by AICF created barriers for competing organizers and resulted in denial of market access. |
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By virtue of Section 60 of the Competition Act, provisions of Section 4(1) shall have effect despite Rule 149.
Overriding Effect of Competition Act
“The provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force.”
Therefore, Section 4 of the Competition Act shall prevail despite Rule 149 of the GFRs.
It can therefore be stated that the mandatory requirement to use GeM for public procurement must satisfy the parameters under the Competition Act, 2002.
If GeM is found to be in a dominant position in the market for e-tendering and reverse auction platforms for public procurement, it cannot abuse its dominant position to prevent other platforms from entering the market or discriminate against them.
Reference
[1] Bhimrao Ekanth and Ors. v. Patilbua Ramkishan and Ors. (03.12.1959 – BOMHC): MANU/MH/0174/1960
Suniti Kaur (Ms) and Ashwini Panwar (Mr)
Co-Founder & Managing Partner at Alaya Legal
