Beyond Profit
The Expansive Scope of an ‘Enterprise’ under the Competition Act
**Daksh Arora
Introduction
An “enterprise” has been defined under Section 2(h) of the Competition Act, 2002 (hereinafter ‘CA 2002’) and brings within its ambit any firm or person engaged in activities relating to production, storage, supply, distribution, acquisition, etc. of goods; or, in the provision of services of any kind. In 2022, in response to a notice for violating sections (4)(2)(a)(i), 4(2)(b)(i), and 4(2)(c) of the CA 2002 (“ABFI Order”), the Amateur Baseball Federation of India (“ABFI”)– a non-commercial entity, argued that it may be a ‘person’ as defined under Section 2(i)(v) of the Act, however, it is not involved in any commercial activity and as such not an ‘enterprise’ in terms of the definition of the Act. After careful consideration, the CCI rejected this submission and passed a cease-and-desist order against the ABFI. This assessment of whether or not an entity qualifies as an enterprise under the Act is essential, as no allegation of abuse of dominance under Section 4 can be made against an entity that is not an “enterprise” per se.
Competition regulators across the globe have encountered cases where entities claim exemption from scrutiny by virtue of not being subject to the scope of a statute. A pertinent example is Verax Biomedical Inc.’s antitrust suit against the American Red Cross (“ARC”) for leveraging market power to foreclose alternative bacterial detection services from the market. In its decision, the US District Court of Massachusetts held that the ARC, although a federally chartered corporation, is not subject to liability under the Sherman Act, as it is not an antitrust “person”. This judgement reflects a narrow construction and definitional scope of the Sherman Act to exclude a quasi-public entity like ARC from scrutiny by treating it as a federal instrumentality (despite the fact that ARC’s status as a corporation requires it to work independently of the US government) resulting in a broad interpretation of immunity for entities involved in similar disputes in the future. In order to tackle such strategic manoeuvres where entities are able to abuse their market dominance without being subject to scrutiny. The CCI chooses to undertake a liberal and expansive interpretation of Section 2(h). This article makes a case for how the CCI has succinctly laid out a test and its supplementary caveats to determine the nature of an entity. Central to this test is a functional assessment that examines an entity’s contractual independence, economic engagement, and market control, while exempting purely regulatory activities and ensuring competitive neutrality in both public and private market participation.
Engagement in Economic Activity
The CCI’s expansive and functional interpretation of the term “enterprise” is clearly demonstrated in the investigation under Section 19(1)(a) against the Board of Control for Cricket in India (“BCCI”) for irregularities in its business operations. In Sh. Surinder Singh Barmi v. Board of Control for Cricket in India (“BCCI Order”), the BCCI contended that it is not an enterprise, and is a ‘not-for-profit society’ for the promotion of cricket, and hence is not subject to competition scrutiny. The BCCI argued that its activities are outside the purview of the Act, especially Sections 3 and 4; since its commitments are neither driven by, nor conditional upon commercial considerations, and revenue obtained is ploughed back into the game of cricket. This recurrent stance taken by similar entities, especially sports societies, underscores a fundamental misconception and low-hanging fruit for bodies to take advantage of; that the absence of profit, or motive thereof, equates to de facto absence of potential competition concerns, revealing a narrow form over substance interpretation of what constitutes an enterprise.
The CCI rightly rebutted the submissions and held that the definition of an “enterprise” under the Act emphasises the economic character of the operations and makes no apparent differentiation between the motive of such economic activity, i.e., it is materially irrelevant whether an economic activity is performed for profit, commercial gain, or altruistic gain. In the BCCI order, the Director General (“DG”) noted that although the BCCI is a society and a non-profit organisation, its activities relating to the Indian Premier League, such as franchise rights, media rights, and other sponsorship rights, involve revenue generation and are distinct from so-called non-profit activities. These activities lie within the realm of commerce, and market players bidding for such rights in the market are also motivated by financial gain. Hence, the CCI observed that the BCCI is an enterprise under the CA 2002.
This interpretation makes a case for focusing on the functional aspects of an entity rather than its institutional or structural nature. The scope of the CA 2002 on the institutional front has been kept broad enough under Section 3 to include virtually all entities, including ‘persons’ as well as departments of the government; whereas on the functional front, this assessment extends ambit of the CCI to economic activities in a general sense and not restricted to organisations. With this interpretation in mind, the nature of economic activities discharged by entities, notwithstanding the commercial motive (or lack thereof) behind them, would be an important criterion for determining the qualification of the said entity as an enterprise.
Consequently, non-commercial entities or activities may be subject to the Act’s purview in the future. Considering a charitable trust that operates a medical equipment rental service, despite being a non-profit organisation with altruistic goals, its systematic process of renting medical equipment at market rates (or lower) and engaging with commercial providers would juxtapose it as an “enterprise” under the CA 2002. The economic activities of the trust in the market, from procurement to supply, would impact market dynamics for competitors or players, irrespective of its non-profit social welfare objectives, hence subjecting it to regulatory scrutiny under Section 4 by virtue of its economic indulgence.
Four-Pronged Test
The CCI in CJ Darcel Logistics Ltd. v. Dumper and Dumper Truck Union Lime Stone issued a cease-and-desist order against the Dumper and Dumper Truck Union Lime Stone (“DDTU”) for violating sections 3(3)(a) and 3(3)(b) read with section 3(1) of the CA 2002. Pertinently, the CCI did not delve into the allegation of abuse of dominant position, by noting that the DDTU cannot conclusively be said to be an ‘enterprise’ within the meaning of the Act, as it does not engage in any economic activity, and hence cannot be scrutinised under Section 4 thereof. In its decision, the CCI placed reliance on the Shivam Enterprises order and delineated the nature of the DDTU through a four-pronged test. Although the test was propounded to analyse the nature of co-operative societies as enterprises, the test can equally guide the classification for other forms of autonomous bodies like trade associations, regulatory organisations, governmental departments etc. as well. According to this test, a society would be considered an enterprise if: it takes contracts in its own name and executes them through its members; customers make payments to the society for services; members receive and retain a commission from the society for each transaction or activity; and the union’s members are appointed by the society itself in a self-regulating manner, leaving customers with no control or choice over such appointments.
Due to a lack of argumentation in favour of the second and third conditions, the DG did not reach a conclusive argument to consider DDTU as an enterprise and did not delve into the allegations under Section 4. Nonetheless, the DG has certainly laid down a prudent path in this case for ascertaining whether an enterprise exists within the definition given in the Act. The second and third prongs of the test have rightfully acquired substance and prominence in competition jurisprudence through other orders of the commission, as well as in foreign jurisdictions. In the EC’s decision in Laurent Piau v. Commission, the General Court held that FIFA’s regulations on players’ agents had economic implications and could influence competition, affirming that economic activities by regulatory bodies can fall within competition law scrutiny. The Court accepted the view that FIFA’s members are national associations, which are groupings of football clubs for which the practice of football is an economic activity. These football clubs are therefore undertakings within the meaning of Article 81 of the European Economic Treaty (erstwhile Article 101 of the Treaty on the Functioning of the European Union) and the national associations grouping them together are associations of undertakings within the meaning of that provision.
This test dismantles the veil of a self-proclaimed “non-commercial” status by dissecting the mechanics of an entity’s market participation. The first and fourth prongs assess institutional autonomy and control, ensuring that an entity cannot evade scrutiny by outsourcing its operations (while retaining central authority); and the second and third prongs examine financial flows, establishing that revenue-driven transactions, even within a cooperative or non-profit framework, may signify economic activity. This layered analysis can prevent entities from exploiting formalistic labels to operate outside competition law while maintaining market control.
Competitie Neutrality
In order to maintain a level-playing field for both private and governmental entities, Indian Courts have time and again affirmed the Competitive Neutrality principle; clarifying that both governmental and private undertakings may be subject to scrutiny under the Act. The Hon’ble Delhi High Court held that the Indian Railways is an ‘enterprise’ under the Act, and the Commission is empowered to hear complaints against it for alleged abuse of dominant position in the goods transport sector, notwithstanding its governmental status. Justice Vipin Sanghi dismissed the railway ministry’s plea holding that there is a “commercial angle” to the services rendered by the railways. The embodiment of this principle in various jurisdictions, e.g. “State Aid” in the form of Article 107 of the Treaty on the Functioning of the European Union (TFEU), reflects the laissez-faire economic philosophy of creating a regulatory landscape where government departments and private entities are subjected to similar competitive scrutiny, thereby ensuring market efficiency with an aim to resist state-sponsored market distortions in India’s increasingly-liberalised economic framework. The CCI recently upheld this principle by directing investigation against Indian Rare Earth Limited, a Central Public Sector Undertaking, over allegations of abusing its dominant market position through pricing tactics and denial of market access to competitors.
Distinction from Regulatory Functions
The Act scrutinises entities as “enterprises” based on their substantial economic interactions, irrespective of the motivation behind these activities. However, when an organisation purely executes statutory responsibilities or regulatory functions without engaging in market-like transactions, it remains exempt from competition law considerations. Economic activities involve market transactions, revenue generation having potential competitive impacts, whereas regulatory functions focus on implementing governmental or institutional mandates, providing oversight, and serving public interests. This approach ensures that essential institutional mechanisms are protected while preventing potential market abuses. In this connection, the CCI has held that the Bar Council of India (“BCI”) cannot be covered under the ambit of an “enterprise” under the Act. The Commission held that the BCI’s powers to make rules for discharging its functions under the Advocates Act, 1961, such as qualifications and disqualifications for membership, prescribing standards for legal education etc. appear to be regulatory; not economic, with respect to the legal profession; i.e. regulatory functions discharged by a body are not per se amenable to the CCI’s jurisdiction.
Analysis and Conclusion
Unlike the U.S., where the Chicago School’s Consumer welfare hypothesis stands in favour of the producer; limiting enforcement and scrutiny against businesses to direct price and output effects, India’s approach aligns more with the European Ordoliberal model in antitrust, which prioritises a market welfare structure and fairness for consumers (Vitalpolitik). As a result, Indian courts tend to be stricter in striking down anti-competitive structures, while U.S. courts adopt a liberal approach by allowing firms greater leeway unless market effect through price or supply is substantial. Other jurisdictions, such as the European Union, have also consistently operated on the principle that it is the nature of economic activity, not its organizational form, that determines whether an entity is subject to competition law. Global practices, while varied, clearly favour an effects-based analysis of an enterprise’s market impact instead of formal structures.
The ABFI, DDTU and BCCI Orders are evidence of CCI’s progressive inclination and strictness towards the inclusion of non-commercial entities within the definition of “enterprise” – as long as they are deemed capable of substantially affecting market dynamics. This approach, in ascertaining an “enterprise” under the CA 2002, reflects a functional assessment of prioritising market impact over governance structure or profit motives. These regulatory practices aim to ensure that institutions engaging in legitimate market activities must be subject to competition scrutiny, as unchecked exemptions can create artificial barriers, restrict market access, and ultimately harm fair competition. Although this stance ensures broader competition scrutiny, it also risks overreach by bringing entities with minimal market impact under the CCI’s ambit. Given India’s evolving market, a middle path establishing clear criteria for classification can ensure a level-playing field for businesses from an ease-of-doing-business perspective, while simultaneously retaining flexibility to prevent unnecessary enforcement.
**Daksh Arora, a second-year law student at Dr. Ram Manohar Lohiya National Law University, Lucknow.
**Disclaimer: The views expressed in this blog do not necessarily align with the views of the Vidhi Centre for Legal Policy.