EXTRA TERRITORIAL JURISDICTION OF CCI IN MATTERS REGARDING COMPETITION ACT
Category: Commercial Law
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In keeping with this intent, not only is the Competition Commission of India (CCI) vested with powers to monitor anti-competitive behaviour taking place within the country but under Section 32 of the Act also empowered to take cognisance of an act taking place outside India but having an adverse effect on competition in India. The Act by allowing CCI to exercise extraterritorial jurisdiction has made it possible for CCI to take action against anticompetitive conduct involving imports, and foreign cartels which may adversely affect the Indian market. While CCI has been given such powers it is yet to be seen how it balances its domestic responsibilities along with keeping track of international developments keeping in mind the infrastructure available to it. This article attempts to analyses the grant of power to the CCI under Section 32 and the consequences thereof.
Keywords- Competition, Monopolies, Extraterritorial jurisdiction, International development.
INTRODUCTION-
The economies of the world have become increasingly globalised and with growing crossborder trade, attempts to monopolise markets and restrict fair competition cannot be effectively mitigated by national competition agencies in isolation. Post the economic reforms of 1991, the quantum of international transactions has increased for the Indian market, which also leaves it vulnerable to transnational anti-competitive behaviour. One way of countering it is ensuring extraterritorial jurisdiction of Indian laws over such practices, which is through the effects doctrine.
Meanwhile, the origin of competition law can be traced back to United States – the enactment of the Sherman Act in 1890. The US competition laws are considered to be comprehensive and effective and the Indian laws, particularly the Competition Act, is said to be modelled on similar lines. The US has recognised the effects doctrine and even otherwise has an effective mechanism for exercise of extraterritorial jurisdiction. In absence of an international agreement on an anti-competitive framework, the effects doctrine is seen as one of the ways of ensuring national interests are protected in face of international malpractices.
GLOBALISATION OF COMPETITION LAWS-
With the incoming of the twentieth century, trade has seen an explosive growth and has increasingly become a subject- matter of the world at large. This change in the nature of the trading activities, has made it a subject of international law.
Even though trade has been recognised as a subject of international law, yet the principles of international law do not provide an answer to the perplex problems associated with the conflicts of jurisdiction of competition authorities. In addition to this, various nation States have adopted their own codes on competition law which further increase the problems.
As an example, in cases of transnational mergers, competition authorities of various States investigate the transaction. Due to the varied competition law codes, each authority would have a different perception of what should be permissible and what should not be.
However, competition authorities have recognised that international cooperation is the key to curb down anti-competitive practices which transcend national boundaries, and is possibly the only way to achieve a successful and effective solution.
DRAFT INTERNATIONAL ANTITRUST CODE
In 1993, a Working Group of Experts and the renowned Max Planck Institute developed a comprehensive proposal for the internationalisation of competition law, the Draft International Antitrust Code. This Draft Code envisaged the creation of regime based on certain ‘minimum standards‘ that were considered to be crucial to the functioning of any code on competition law, and was presented to the World Trade Organisation and the Organisation for Economic Cooperation and Developed.
The Draft Code was based on a two-pronged model- creation of two institutions. In this model, the first institution, the International Antitrust Panel, was entrusted with the adjudicatory functions and was to hear disputes arising out of the provisions of the Draft Code.3 Furthermore the International Antitrust Authority, the second body under the system, was to be vested with administrative and prosecutorial functions. Upon detailed analysis, the Antitrust Authority, was entrusted with the power to appeal National cases to which it was not a party. In addition to this, it had the power to raise claims before the International Antitrust Panel against domestic authorities which were not complying with their obligations and duties under the Draft Code. It also was to guide the domestic States into complying with their obligations under the Draft Code.
However, the Draft Code was faced with negative criticism at Marrakesh. As a consequence, due to a lack of consensus, the Draft International Antitrust Code was not able to form a part of the numerous treaties annexed to the WTO Charter. Unfortunately, the proposal of the minority group of the Working Experts which advocated for the progressive harmonisation of antitrust policies of States with the Draft Code failed to reach the required consensus.
In the subsequent years, another attempt at the internationalization of competition law was made the First Ministerial Conference of the Parties to the WTO in 1996. The European Union was heavily in favour of such internationalisation and sponsored for the creation of such a framework within the workings of the WTO. However, as was before, the Ministers were unable to reach a consensus on the substantive issues of such a code. Although, as a compromise, the Ministers did consent to the establishment of another working group to identify the overlaps and interaction of trade with the competition policy. This working group, christened the WTO Working Group on Trade and Competition Policy presented its first report in November 1998 to the WTO‘s General Council and perseveres to keep the issue on the WTO Agenda.
COMPETITION LAW IN INDIA-
THE MONOPOLIES & RESTERCTIVE TRADE PRACTICES ACT, 1969
The world economy has become increasingly globalized, with domestic markets seeing higher influx of foreign trade and investment. The economic effects of anti-competitive behavior such as cartels and mergers are not restricted by territorial boundaries. In absence of an international framework on competition law, questions with regard to extraterritorial application of domestic laws over anti-competitive undertakings in another country and the need for laws to prevent excessive assertion of such jurisdiction remain unanswered.
An instance of applicability of extraterritorial jurisdiction arose when a complaint was filed by the All India Float Glass Manufacturers‘ Association and the Alkali Manufacturers‘ Association of India before the Monopolies and Restrictive Trade Practices Commission (MRTPC), seeking a temporary injunction against three Indonesian companies for selling float glass at predatory prices in India, as well as against the American Natural Soda Ash Corporation (ANSAC) for forming a cartel of American ash soda producers which was likely to have an adverse effect for India.
Post enquiry, the MRTPC passed an interim injunction (subsequently confirming it) directing ANSAC to refrain from cartelization in soda ash export to India. The injunction was challenged by M/s. Haridas Exports (on behalf of ANSAC and the Indonesian companies) before the Supreme Court. The court passed the following orders:
MRTPC is entitled to take action with respect to restrictive trade practices carried out in India on imported goods – here the goods in question were not imported, thus not falling within the meaning of ‘goods’ as per the Act and therefore beyond MRTPC‘s jurisdiction.
The MRTP Act does not confer any power to restrain imports, nor does it confer any extraterritorial jurisdiction on MRTPC.
If a cartel is selling goods to India and still making profit then it is not in the interest of the general body of consumers in India to prevent the import of such goods.
Thus, even though the Supreme Court recognized the effects doctrine as giving jurisdiction to MRTPC over restrictive trade practices carried outside India but adversely affecting trade in India, the MRTP Act in itself was too narrow to deal with cross-border competition cases.
THE COMPETITION ACT, 2002
The Competition Act was a result of the recommendations by the Raghavan Committee, which was set up in 1999 to study the efficacy of the MRTP Act and propose measures for promoting competition over and above curbing monopolies. The Committee recommended repealing the MRTP Act and replacing it with the Competition Act, under which the Competition Commission of India was to be established.
CCI was established in 2003. It consists of a Chairperson and ten members as appointed by the Central Government. S. 19 of the Act empowers CCI to inquire into contravention of the Act‘s provisions on a suo-motu basis or on receiving information from any person, consumer or association, or on reference made by the Central or State Government. The Act also provides for search and seizure and leniency provisions.
The MRTP Act did not define cartels and thus an understanding of the same could only be drawn from restrictive trade practices, as defined under S. 2(o). In U.O.I & Others v. Hindustan Development Corporation and Others, three essential ingredients of a cartel were identified: parity of prices; agreement by way of concerted action suggesting conspiracy; monopoly, restricting or eliminating competition.
Cartels are explicitly defined under the Competition Act under S 2(c). They come under the broad heading of anti-competition agreements under S. 3, on the basis of a presumption that such agreements are bound to distort the competitive process. However, vertical agreements cutting across various levels of the manufacturing and distribution process are not covered under the Act. Exemptions to cartel enforcement are in the form of express notification by the government38 and reasonable conditions observable under laws of copyright, patents, trademarks et al. as well as agreements for exports.
S. 32 of the Act confers extraterritorial jurisdiction over CCI. The proviso to S. 18 states that the CCI may enter into any memorandum of understanding or arrangement with any agency of a foreign country in order to exercise its functions under the Act, with the prior approval of the Central Government. S. 3 of the Act covers anti-competitive agreements, which authorizes the CCI to inquire into any agreement, even if entered outside India, by parties regardless of whether they are in India if such agreement has, or is likely to have, an appreciable adverse effect on competition in the relevant market in India.
Thus both S. 3 and 32 provide for statutory recognition of the effects doctrine. However, the only regulations notified with respect to S. 32 are the Competition Commission of India (General) Regulations, 2009 – providing the procedure for enforcement of extraterritorial jurisdiction in accordance with the Code of Civil Procedure, 1908.
CONCLUSION-
The effects doctrine, laid down in the AlCoA case, stands to be well recognized in US jurisprudence. India, in order to broaden the scope of its competitive laws, gave statutory recognition to the same under S. 32 of the Competition Act, 2002. But mere pro visions will not suffice – there needs to be a mechanism for enforcement of such jurisdiction.
The means of achieving such enforcement are varied through memorandum of understandings, bilateral agreements and regional frameworks. India would do well to adopt the US position on collaborating with other enforcement agencies, through bilateral agreements and mutual legal assistance treaties. However, at the same time, India needs to work towards some form of regional framework, in order to counter vested interests as were observed on part of the US during the ANSAC case. The developing countries are on a weaker footing in terms of enforcing competitive legislations, leaving scope for their economies to be easily subject to cartelization and developed monopolization. The South Asian Association for Regional Cooperation could be a good forum to start with, or an alternative framework with countries such as China and Russia, which also have their competition laws at the nascent stage, could be worked out.
Even in absence of instruments as abovementioned, US jurisprudence is witness to enforcement of extraterritorial jurisdiction on its own accord. The Indian provisions are yet to be tested on its implementation in isolation and it is contingent upon the will of the state to assert such jurisdiction but this covers subject- matter jurisdiction alone. With respect to enforcement, the CCI must endeavor to negotiate bilateral agreements with other competition regulators, as per S. 18 of the Act.
OLQ is a Pan-India basis law firm connecting legal expertise nationwide.
WRITTEN BY: ALOK G. CHHAPARWAL
GUIDED BY: ADVOCATE ANIK
