Summary: The Competition Act of 2002 governs commercial competition in India, with the Competition Commission of India (CCI) safeguarding consumer interests and preventing anti-competitive practices. Capitalism’s global spread has heightened the need for market regulation to ensure fair trade and consumer protection. With globalization and cross-border transactions, issues like international cartels, mergers, and anti-competitive practices by transnational corporations (TNCs) have become increasingly complex. CCI’s extra-territorial jurisdiction, granted under Section 32 of the Competition Act, enables it to address anti-competitive practices outside India’s borders. However, enforcing laws internationally, especially regarding evidence collection and cooperation, remains challenging. Bilateral treaties and international agreements, such as the Hague Convention, help mitigate jurisdictional hurdles. International cartels, mergers, and dumping practices pose significant threats to developing economies, requiring enhanced cooperation between competition authorities and global enforcement protocols. Developing nations must strengthen their competition laws, build institutional capabilities, and collaborate with foreign partners to combat anti-competitive behavior and protect domestic markets.
Introduction
Competition Act of 2002 which governs the commercial competition in India was introduced with the objective of promoting healthy competition amongst the competitors in the relevant market. The Competition Commission of India (the Commission) was established in accordance with the Competition Act, 2002 (the Act) to safeguard consumers’ interests, prevent practices that could harm competition, encourage and maintain competition in Indian markets, and ensure other market participants can freely engage in trade, among other things.
In Global context “capitalism” spread like a wildfire which was fuelled by the industrialisation of 18th and 19th century. It first appeared in the 17th century, when mercantilism collapsed. It is essentially an economic system built on the principles of free market forces determining pricing for products and services, private companies owning the means of production, and little government intervention. Because capitalism grants market participants economic freedom, it is claimed to promote efficiency and economic growth. Nonetheless, capitalism has some disadvantages. It raises income disparity, creates monopoly power, and prioritises economic gains over social ones. Because of these drawbacks, capitalism must be regulated with the assistance of government involvement.[1]
Since the advent of Capitalism and Globalization, there has been an increasing need to regulate the market to prevent unfair trade practices, promote consumer satisfaction and healthy competition which is required to sustain the market. The need for the commission to have international jurisdiction was recognized by the committee formed by S.V.S Ragavan. The problems with global competitiveness may significantly affect a country’s economy. Consumers will also directly be impacted by increased costs, unchecked quality control, and limited product availability.
Overview of Extra-territorial Jurisdiction
To constantly be in line with the perennial changes in the market, the competition authorities need to adopt regulation which would deal with the issues which have an impact over such relevant market. In order to prevent such anti-competitive practices nations, enter into bilateral agreements with other nations or groups such as Organisation of Petroleum Exporting Countries (OPEC), in the world which strives to develop with time.[2] Such agreements have eased the countries to resolve the issues and protect their relevant market.
The matter related to jurisdiction can be taken under the ambit of Public International Law as the function provided by its concept enables the state to regulate their citizens. For the purpose of law related to corporates or taxation, companies incorporated are also considered as citizens of that country. Cross-border transactions and businesses at different levels have been tried to be consolidated by the judicial bodies to include (such acts or transactions originating outside and terminating within the territory of that particular country) under the subject matter of jurisdiction. Any certain connections of such transaction can be taken as acts completed within the territory.[3]
The concepts of territoriality have been widened in the recent decades by various judicial precedents given out by western countries. To illustrate, charging of predatory pricing or taking over a competitor within the territory of the state, or joining hands with other major players to allocate market, all such practises can be anti-competitive as they have a direct effect on the state’s economy.[4] In such instances the application of jurisdiction over the person violating the law is effortless, however enforcement of those laws over another state’s territory is exacting. India constantly faces the issue of enforceability of its judgements in other states as there are jurisdictional problems.[5] The term enforceability is not just restricted to imposition of penalties or punishments, it includes summoning, investigating and collection of evidences.[6]
The primary point at issue for the authorities is for the collection of evidences and information of anti-competitive acts which took place outside their jurisdiction. Treaties and other bilateral agreements have tried to solve the issue to a certain extent. For example, India is a signatory to the Hague Convention on Taking of Evidences,[7] thereby assisting in collection of evidences from any other signatory of the said convention. However, most of the states are not cooperative with respect to providing evidences or investigation by the authority and usually they take the defence of confidentiality when it comes disclosure of such information.[8]
International Competition Challenges
- International Cartels: International Cartels pose a huge threat to the economies of the developing countries, as they exploit the weak tax regulatory system to gain unfair economic advantages. They thrive in less regulated environment, significantly causing losses, even after them being convicted in the developed countries. The World Bank estimates that, in the 1990s, 16 cartels accounted for US$81.1 billion in “cartel-affected” imports to developing nations, pointing out the enormous economic impact.[9] Cartel hinders economic growth and development by inflating the price, limiting supply and using unfair means to drive out their competitors in the relevant market to by employing predatory tactics. Developing countries rely heavily on the regulations of developed countries to tackle the issues related to competition in their market. For addressing the menace we require international cooperation, strengthened enforcement protocols and empowered authorities in the developing countries.
- Cross-border Mergers & Acquisitions (M&A): The increasing proportion of the Foreign Direct Investment (FDI) to the host country flows through M&As of pre-existing firm. This could lead to unhealthy market dominance by such companies which may be abused. When the FDI restriction are lifted, it becomes difficult for developing nations to prevent unhealthy acquisitions of the domestic firms, in effect causing unfair market dominance by Transnational Companies (TNC). When the size of TNCs and economies of developing countries are compared it helps in understanding that they cause serious detrimental effect on the economy as a whole.
- Anticompetitive practices by TNC: The power of these corporations let them to take up anticompetitive practices, which is detrimental to economies and consumer welfare. This includes both horizontal and vertical agreements. Patent pooling and cross-licensing agreements between rival companies are examples of IP licencing arrangements that might serve as a means of cartel formation. It could be helpful to address this by including specific clauses in the national CL that deal just with intellectual property.
- Dumping and Antidumping actions: Regional economic co-operation can lead to dumping.[10] When a company has market dominance in a country they could afford to export the products at an artificially lower price. Which would lead to dumping of the products into another country’s economy thereby running the competitors out of business and gaining monopoly over their market. Such menace could be tackled by developing a well thought Competition Regulation.
Dealing with Anti-competitive Challenges
Developing nations must first create strong national competition regulations in order to handle the issues brought forward by anti-competitive behaviour and global competition. These laws give national competition authorities (CAs) the authority to look into and address anti-competitive behaviour by transnational corporations (TNCs) in domestic marketplaces. Furthermore, by including merger approval procedures in these laws, CAs can assess mergers involving foreign companies and apply conditions to them in order to ensure fair competition and safeguard local interests.
A number of developing nations that have taken strong action against anti-competitive behaviour serve as examples of the significance of such legislation. The effectiveness of national competition laws in preserving market integrity has been demonstrated by the intervention of the Competition Commission of Zimbabwe, the Competition Commission of Zambia, and the Monopoly Control Authority of Pakistan in cases involving companies such as Lafarge, BAT-Rothmans, and Unilever Brooke Bond.[11]
Furthermore, the existence of competition law which is comprehensive, with potential for criminal penalties can serve as a deterrent, reducing the likelihood of corporate exploitation without requiring a thorough investigation or prosecution. The proactive role that legislation plays in promoting just and competitive economic environments is highlighted by this preventive impact.
National competition laws are important, but developing-country CAs frequently struggle with lack of resources and experience when dealing with issues relating to international competition. The cartels bring in obstacles so sophisticated that even the well-structured regulations of developed nations find it obscenely difficult to tackle. The fact that cartel activities are covert makes them especially hard to find and prosecute, as shown by the challenges European and American law enforcement agencies have in dealing with cartel activity within their borders.[12] Due to logistical and legal constraints, the challenge of combating cartel activity becomes much more difficult for developing nations.
Developing countries do not have the resources to undertake sophisticated surveillance or get evidence in the boardrooms of foreign firms, in contrast to developed countries.
Considering these obstacles, developing nations need to look at different ways to get beyond informational barriers and improve their ability to deal with the problems of international competition. This means investments in knowledge and resources to make information collection and analysis easier, as well as encouraging collaboration and partnerships with international counterparts.[13]
Developing nations might acquire competence in handling intricate competition challenges through collaborative initiatives like agreements for knowledge-sharing and capacity-building with established competition authorities.
Developing country’s competition authorities (CAs) can improve their ability to protect fair competition and foster economic development in a global marketplace that is becoming more interconnected by utilising external support and growing internal capability.
For developing nations to combat anti-competitive behaviour and promote fair market competition, enacting national competition laws is an essential first step. But overcoming the obstacles presented by global competitiveness calls for coordinated measures to build institutional strength, improve information availability, and promote cooperation with foreign partners. Developing nations can only successfully manage the complexity of global competition and protect their economic interests over the long run with such policies.
- Ad hoc solutions: Competition Law of a country applies to the companies only if the activities conducted by them causes appreciable adverse effect in the domestic relevant market of the country. In other words, the effect which the exporting products have in the market of another country would not count. However, the developing country could be given an opportunity to submit evidence through special submissions which would let them display the impact it is making in their market, without initiating a fresh proceeding within their jurisdiction. When cartels are being dealt, the harm caused to a developing country’s market could be computed by the developed state CAs while calculating fines; or extra conditions and requirements could be imposed during mergers to ensure that competition in the other market is not hampered.[14] Such kind of involvement is ad hoc and completely depends upon the developed country’s courts or CAs acceptance of evidences from developing countries. It would vary from one case to another, as it relies on the developing countries vigilance to keep a close track on the activities of firms which is likely to cause anti-competitive effects over their relevant market.
- Informal co-operation: This type of direct collaboration takes place between competition authorities (CAs) and operates outside of official agreements between national governments. Authorities in developing nations can easily approach the CA of another nation for information about a company or details about the investigation that authority conducted. For developing countries which is looking to strengthen the capacities of their own CAs, these kinds of information exchanges are quite beneficial. Yet there arises a significant downside from the sensitive character of a significant amount of the data that companies maintain; this data is frequently classified as “business-sensitive” and so private.[15] As a result, authorities might be limited in what they can tell their counterparts about this information. However, there is an exception for information that can be exchanged with authorities regarding cartel activity. This exemption offers a crucial channel for cooperation in the fight against anti-competitive behaviour.
Developing nations can enhance their ability to combat anti-competitive practices and effectively handle common concerns by combining their combined knowledge and experience. Essentially, this decentralised method of cooperation—which is made possible by direct contact across CAs—provides developing nations with a workable way to obtain important knowledge and experience. Even though there are still issues with protecting the privacy of some corporate information, focused cooperation and knowledge-sharing programmes offer developing countries the chance to learn from one another and strengthen their capacities.
- Formal Co-operation: Authorities may go to a higher degree of cooperation, which is formalised in an agreement between the two governments, once they have some experience cooperating and are certain of one another’s abilities to protect confidential information. For an instance, through a network of agreements on cooperation, competition authorities in the US, Canada, Australia, the EU, and Japan are connected.[16] For two reasons, developing nations have generally not participated in these kinds of agreements. Two factors contribute to this: first, there are agreements in place between agencies with similar levels of information and experience; second, there is a widespread belief in developed nations that the authorities in developing nations may find it challenging to maintain the confidentiality of commercial information provided to them. The agreement between the United States and Brazil is one of the few exceptions.[17]
Approach by the Competition Commission of India
CCI assumes its power of extra-territorial jurisdiction by the virtue of section 32[18] of the Competition Act 2002, unlike section 14 of the previous Act, i.e., Monopoly and Restrictive Trade Practices Act, 1969 (MRTP Act), it provides the commission with certain powers to investigate and pass orders relating to matters of abuse of dominant position, any anti-competitive agreement and combinations such as mergers and acquisition of companies, which could have a detrimental effect in the relevant markets of India and which is in violation of the provisions of the MRTP Act, outside the territory of India.[19]
The competition authorities in neither the UK nor the USA are explicitly granted such enormous jurisdiction by their respective competition laws. In plain language, Section 32 grants the CCI these two powers regardless of whether the anti-competitive act occurred outside of the territory of India or whether the party to the agreement is based outside of the country. Prior to the 2007 amendment Act[20], the CCI could only initiate an investigation in certain situations, but the Act’s 2007 amendment enhanced the Commission’s overall dynamic. Before the Act there was no provision in the MRTP Act which recognizes the extraterritorial jurisdiction of the competition authority.
It is evident that the Indian Competition Commission is more powerful than the competition authorities in the US or the EU when the provisions of Indian competition law are contrasted with those of EU or US competition laws. This could be because we’ve learned from their errors and implemented the appropriate changes. The other explanation might be that the commissions of EU and USA are not expressly authorised to exercise such jurisdiction by the relevant provision of US competition law or by Articles 81 and 82 of European Community Law.[21]
Conclusion
Developing countries must adopt strategic and cooperative measures to navigate through the intricacies of global competition, protect their economic interests, and guarantee fair market practices. Such proactive measures are best shown by the Competition Act of 2002 in India, which grants the Competition Commission of India (CCI) strong extraterritorial power to look into and decide cases affecting Indian markets, irrespective of the source of anticompetitive behaviour.
But tackling issues with international competition calls much more than just changes to the law. Developing countries frequently struggle with a lack of resources and inexperience in handling sophisticated cartel operations and other forms of anticompetitive behaviour. The importance of informal and formal collaboration mechanisms among competition authorities is vital in bridging these gaps.
Informal cooperation enables developing countries to strengthen their ability to counteract anticompetitive behaviour by directly sharing information and expertise between competition authorities of different countries. There may be issues with corporate information confidentiality, but targeted collaboration and knowledge-sharing initiatives provide workable answers to improve institutional capacities.
Formal cooperation agreements between governments also open the door to more structured information sharing and in-depth cooperation. Initiatives like the one between the United States and Brazil show the possibility for increased international cooperation, despite having been less involved in such agreements. The Competition Commission of India’s strategy can be used as a model by other developing nations facing comparable obstacles. Countries can foster an atmosphere that is favourable to fair competition and economic growth by endowing competition authorities with extraterritorial jurisdiction and passing comprehensive competition laws.
To tackle the challenges of international competition, a comprehensive strategy involving legislative reforms, capacity-building initiatives, and international collaboration is necessary. In order to effectively negotiate the complexity of the global marketplace, developing nations must place a high priority on fortifying their frameworks for competition and aggressively engage with global partners. Developing countries have the potential to reduce the negative consequences of anticompetitive behaviour and promote a fairer and more competitive economic environment that benefits both enterprises and consumers by working together with coordinated efforts.
[1] Competition Commission of India, Introduction to Competition Law (Competition Commission of India 2016). http://164.100.58.95/sites/default/files/advocacy_booklet_document/CCI%20Basic%20Introduction_0.pdf
[2] Einer Elhauge et al, GLOBAL COMPETITION LAW AND ECONOMICS, at page 152 (2007).
[3] Tran Van Hoa, Competition Policy and Global Competitiveness in Major Asian Economies, at page 245 (2003).
[4] Kerrin Vautie, International Trade and Competitive Policy: CER, APEC and WTO, at page 103.
[5] Ibid.
[6] Doern, National Institutions in a Global Market, Comparative Competition Policy, page 25 (2001).
[7] Lennart Goranson, Concepts, Issues and the Law in practice: The Efficient and Effective Competition, Authority Competition Law Today, at page 601 (2008).
[8] Einer Elhauge, supra note 2, at page 178.
[9] Background Paper for the World Bank’s World Development Report 2001, “Private International Cartels and Their Effect on Developing Countries” by Margaret Levenstein and Valarie Suslow.
[10]CUTS Centre for International Trade, Economics & Environment, Challenges in Implementing a Competition Policy and Law: An Agenda for Action (March 2002), Chapter 5, at Page 23.
[11]CUTS, supra note 10, at Page 24.
[12] CUTS, supra note 10, at Page 24.
[13] Ibid.
[14] CUTS, supra note 10, at Page 25.
[15] CUTS, supra note 10, at Page 25.
[16] Ibid.
[17] Ibid.
[18] Sec. 32 of the Competition Act, 2002.
[19] Mitsuo Matsushita, Competition Law and Policy in the Context of the WTO System, Volume 44 DE PAUL LAW REVIEW 1097, 1109 (1995).
[20] The Competition (Amendment) Act, 2007.
[21] Raghuveer Singh Meena, Critique of Extraterritorial Jurisdiction and Effects Doctrine.
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