Enterprise

By Niti Richhariya

Introduction

Almost every contested case under the Competition Act, 2002 (“Act”) begins with a threshold objection that sounds jurisdictional but is really definitional: we are not an enterprise.¹ A trade union says it merely bargains. A development authority says it discharges statutory functions. A public sector monopoly says it serves constitutional goals. A sports federation says it is a non-profit society. A statutory regulator says it regulates rather than trades.

The Competition Commission of India (“CCI”) and other judicial authorities including the Hon’ble Supreme Court of India (“Supreme Court”) have rejected almost all of these arguments, and they have done so by a consistent method: asking not what the concerned entity is, but what it does. That method, i.e., the functional approach, is now so entrenched that it is easy to forget it had no clear textual anchor. Until 2023, Section 2(h) did not use the words “economic activity” at all.² But it does so now.

The Competition (Amendment) Act, 2023³ substituted the definition of “enterprise” with effect from 18 May 2023, and in doing so, it statutorily recognized the judicial interpretation of the term. That development has attracted surprisingly little attention, partly because the amendment’s headline reforms such as deal value thresholds, settlement and commitment, hub-and-spoke cartels overshadowed it out.

This article argues three aspects. First, that the 2023 amendment codified a functional test that Indian jurisprudence had already built, but it did so in a language that is not obviously wider than what it replaced and may in places be narrower. Second, the sovereign function carve-out has been read down so far that it now protects almost nothing, while an entirely extra-textual “regulatory functions” exemption has grown up in its place without any statutory foundation. Third, the point most often missed is that Section 2(h) is not a uniform gateway to the Act. It gates Sections 4, 5 and 6,⁴ but it does not gate Section 3.⁵ Much of the confusion in the case law comes from treating “enterprise” as though it were the price of admission to the entire statute.

I. What the 2023 Amendment Actually Did

Section 2(h) now reads:

“enterprise” means a person or a department of the Government, including units, divisions, subsidiaries, who or which is, or has been, engaged in any economic activity, relating to the production, storage, supply, distribution, acquisition or control of articles or goods, or the provision of services, of any kind, or in investment, or in the business of acquiring, holding, underwriting or dealing with shares, debentures or other securities of any other body corporate, either directly or through one or more of its units or divisions or subsidiaries, but does not include any activity of the Government relatable to the sovereign functions of the Government including all activities carried on by the departments of the Central Government dealing with atomic energy, currency, defence and space.⁶

As evident, the amendment has two aspects to it. First is the insertion of the phrase “including units, divisions, subsidiaries” which front-loads a concept the clause already carried in its tail (“either directly or through one or more of its units or divisions or subsidiaries”). It is best read as putting beyond doubt that an enterprise is assessed as a single economic unit rather than as a collection of separately incorporated shells, and it dovetails with the Explanation, which defines “unit” and “division” to include plants, factories, branches and offices.

The second aspect of the amendment is the crucial one. While the pre-amendment definition brought within its sweep a person/entity “engaged in any activity, relating to the production, storage, supply, distribution, acquisition or control of articles or goods, or the provision of services”, the amended definition catches a person “engaged in any economic activity” relating to those same things.

At first blush, it is tempting to describe this as a broadening of the definition of enterprise, but on a plain reading, it is not. Because “any activity” is, on its face, wider than “any economic activity”; the amendment has added a qualifier, not removed one. So essentially, what the amendment has actually done is stabilise the definition by replacing a broad noun that the courts had narrowed by construction with a precise one that carries an evolved meaning with definite contours. That is a gain in coherence, but practitioners should be alert to the possibility that a defendant may also argue that the amendment cuts the other way: that an activity which is commercial in form but generates no revenue and faces no rival is now excluded because it is not “economic”, even though it would once have been caught as “any activity”.

There is also an unresolved wrinkle in the Explanation to Section 2(h), which survives untouched and provides that “activity” includes profession or occupation. Read with the amended clause, the composite phrase is now “economic activity”, and it is not self-evident that a profession, the classic case of an activity governed by ethical rather than market norms, is an economic activity.

II. The Judicial Route to “Economic Activity”

The functional test applied to Indian antitrust in full form through the celebrated judgement delivered by Supreme Court in Competition Commission of India v. Co-ordination Committee of Artists and Technicians of West Bengal Film and Television, (2017) 5 SCC 17.⁷ The Coordination Committee, a body of film industry trade unions, had pressured broadcasters into dropping a Bengali-dubbed telecast of Mahabharata. The CCI, through a majority view found an antitrust contravention. The Competition Appellate Tribunal (“COMPAT”) set that aside, holding that a trade union raising a grievance was not engaged in economic activity and was exercising a protected freedom envisaged under Article 19 of the Constitution of India.⁸

But the Hon’ble Supreme Court reversed COMPAT’s findings and held that an “[e]conomic activity, as is generally understood, refers to any activity consisting of offering products in a market regardless of whether the activities are intended to earn a profit.” It also set out the test in terms that have been quoted in virtually every subsequent order:

“The notion of enterprise is a relative one. The functional approach and the corresponding focus on the activity, rather than the form of the entity may result in an entity being considered an enterprise when it engages in some activities, but not when it engages in others. … Thus, any entity, regardless of its form, constitutes an ‘enterprise’ … when it engages in economic activity. An economic activity includes any activity, whether or not profit-making, that involves economic trade.”

The above deliberation effectively crystallizes into three broad propositions, and they have proved durable so far. First, that the legal form of the concerned entity is irrelevant. Second, that the profit motive is irrelevant. Third, critically, the characterization is activity-specific and severable, i.e., the same body may be an enterprise for one line of conduct and not for another.

The CCI has applied that logic most consistently to sports federations. In Surinder Singh Barmi v. BCCI, CCI looked past the Board’s status as a non-profit society to its grant of franchise, media and sponsorship rights.⁹ In Dhanraj Pillay v. Hockey India, Hockey India was considered to be an enterprise because it organised tournaments and sold tickets, although CCI cleared it on the merits while flagging the conflict between its regulatory and commercial roles and directing an internal separation of the two.¹⁰ In Hemant Sharma v. All India Chess Federation, the organisation of revenue-generating tournaments sufficed.¹¹ In the Amateur Baseball Federation of India, CCI issued a cease-and-desist direction against a registered society with no commercial character at all beyond its control over who could play where.¹²

The pattern is unmistakable. What the Commission looks for is a market and within that the buyers, sellers, and something being offered into it. Everything else is a presentation as far as antitrust enquiry is concerned.

III. The Digital and Algorithmic Frontier

A more relevant question in the age of digitization is whether a definition drafted in 2002 can carry algorithmic and platform conduct within its ambit. CCI’s Market Study on Artificial Intelligence and Competition (2025) answers it by declining to treat the question as new.²⁷ The study affirms that the Act is sector-agnostic and technology-agnostic and “applies uniformly to all enterprises, irrespective of the industry or technology used”, and it proposes no bespoke definition for AI.

That is arguably the right instinct, and the functional test is what makes it workable. An algorithm is not an enterprise; it is a tool. Liability attaches to the entity that designs, deploys or benefits from it, and that entity qualifies under Section 2(h) if it offers something into a market, which model developers, deployers, platforms and downstream user firms plainly do. Where the definition may yet be tested is at the margins: consortia and standard-setting bodies in AI governance, non-profit foundations distributing open-weight models at zero price, and data intermediaries that never charge anyone. Zero-price supply is already familiar to Indian competition law from the digital platform cases, and Coordination Committee has removed profit motive from the enquiry. The harder residual question is whether free distribution with no revenue model anywhere in the chain constitutes “offering products in a market” at all.

Conclusion

The trajectory of Section 2(h) is a rare example of legislative catch-up. For two decades, the courts and CCI built a functional test out of a formalist text; in 2023 Parliament rewrote the text to match. Consequently, four propositions can now be stated with certainty:

1. Form is irrelevant. Societies, trade unions, statutory authorities, government companies and departments are all capable of being enterprises.

2. Profit is irrelevant. What matters is whether something is offered into a market.

3. The enquiry is severable. An entity may be an enterprise for some activities and not others, and the answer must be given activity by activity.

4. The sovereign function carve-out is narrow. It protects primary, inalienable and non-delegable functions of the State, and nothing else.

But two parameters still remain genuinely open. The first is whether the “regulatory functions” exemption survives, given that it seems to find no accommodation within the amended text and sits awkwardly with the severability principle. The second is what work the word “economic” will do now that it is statutory rather than interpretive, whether it merely records where the case law had arrived, or supplies a defence to entities that engage in activity without engaging with a market. Neither question is likely to stay open for long because the threshold objection is too attractive, and too cheap to run, for it not to be litigated.