Competition Law Assignment.docx

EXTRA-TERRITORIAL JURISDICTION UNDER COMPETITION LAW (Assignment towards fulfillment of assessment in the subject of Competition Law)

Submitted by:

Submitted to:

Shubh Dixit (1245)

Mr. Anand Kumar Singh

B.A., LL.B., (Business Law Hons.)

Faculty of Law

Semester VIII

NATIONAL LAW UNIVERSITY, JODHPUR WINTER SESSION (JAN-MAY 2019)

Contents CONCEPT OF EXTRATERRITORIAL JURISDICTION........................................................................3 JURISDICTION OF CCI................................................................................................................4 ISSUES REGARDING EXTRA-TERRITORIAL JURISDICTION UNDER COMPETITION LAW..............6 EXTRA-TERRITORIAL APPLICATION AND ENFORCEMENT OF INDIAN COMPETITION LAW........6 INTERNATIONAL COOPERATION

AND

COORDINATION

ON EXTRATERRITORIAL APPLICATION OF

COMPETITION LAWS...................................................................................................................7 ICC action to resolve extraterritoriality problems.................................................................8 World Trade Organisation......................................................................................................8 International Competition Network.......................................................................................8 CONCLUSION...............................................................................................................................9

CONCEPT OF EXTRATERRITORIAL JURISDICTION The world of economics and commerce is becoming increasingly global. Businesses are continually their organization and structure through mergers, acquisitions, and joint ventures to complete effectively in the international market. To maintain pace with this constant evolutionary process, communal competition authorities must adopt as well. As a result, various countries and trading blocs have reached agreements dealing with the impacts on competition created by the moving tide of commercial change. These agreements provide a cooperative method to avoid the burdensome legal aggravations and political turmoil that can arise if one country attempts to enforce its competition laws on entities of another jurisdiction. The limits upon a states jurisdictional competence and therefore upon its ability to apply its competition laws to overseas undertakings are matters of public international law1. There are two elements to a states jurisdictional competence. First, a State has jurisdiction to make laws that is to say to lay down general or individual rules through its legislative, executive or judicial bodies.2 This is known variously as a State‘s legislative, prescriptive or subjectmatter jurisdiction. Secondly, a state has jurisdiction to enforce its laws, that is the power of a State to give effect to a general rule or an individual decision by means of substantive implementing measures which may include even coercion by the authorities.3 This is known as State‘s enforcement jurisdiction. Subject-matter jurisdiction is generally accepted in public international law that a State has power to make laws affecting conduct within its territory 4 and to regulate the behaviour of its citizens abroad, citizens for this purpose including companies incorporated under its law. 5 The territoriality principle has been extended in a logical way so that a State is recognized as having jurisdiction not only where acts originate in its territory, but also where the objectionable conduct originates abroad but completed within its territory.6 For the purpose of subject-matter jurisdiction the territoriality and nationality principles are sufficient to comprehend a great number of infringements of competition law, either because the overseas undertaking will have committed some act- for example taking over a 1 Brownlie Principles of Public International Law; Clarendon Press, 6th ed, 2003, Ch. XV 2 Per Advocate General Darmon in Wood Pulp Case, [1988] ECR 5193, p 5217 3 Ibid 4 Territoriality Principle 5 Nationality Principle 6 Principle of objective territoriality

competitor or charging predatory prices within the territory of the State concerned to apply its law, or because an agreement will have been made between a foreign undertaking and firm established within the State in question. In such situations an assertion of subject-matter jurisdiction by one State over natural or legal persons in another may not lead to a conflict at all, provided that the former does not seek to enforce its law in the territory of another state. Most of the controversial conflicts between States in these matters have concerned enforcement rather than subject-matter jurisdiction, and it is against enforcement measures that States have adopted blocking statues.7 Enforcement jurisdiction tends to give rise to the most acute conflicts between States. It is generally recognized that even if subject-matter jurisdiction exists in relation to the conduct of someone in another state, it is improper to attempt to enforce the law in question within that State‘s territory without its permission. For these purposes of enforcement does not mean only the exaction of penalties and the making of final orders such as perpetual injunctions, but refers to all authoritative acts such as the service of a summons, a demand for information or carrying out an investigation. Gathering information can be a particular problem for competition authorities, as business becomes increasingly global, the likelihood of a national authority requiring information which is located outside its jurisdiction increases correspondingly. A problem is that jurisdictional rules developed in the nineteenth century are not particularly well-suited to the business context or the information technology of the twenty-first century. Many legal systems contain provisions whereby States assist one another in relation to these matters. For example the Hague Convention on the Taking of Evidence Abroad to which India is also signatory, provides for one State to assist another in the gathering of evidence. The recognition and enforcement of foreign judgments is an important part of private international law. However cooperation on evidence and the enforcement of judgments is often not provided by one State to another where the former takes exception to an attempt by the latter to assert its law extraterritorially, and most legal systems contains restrictions on the divulging by competition authorities of confidential information.

JURISDICTION OF CCI The mechanism for controlling anti-competitive acts carried on by persons having the location of their operations at some place in India and, therefore, directly subject to the 7 Richard Which, Competition Law, Oxford Univ. Press, 6th Ed., 2009, Pg. 472

territorial jurisdiction of Indian courts and tribunals. It is possible for enterprises without having a fixed place of business in India to control the operations of any enterprise in India in a manner injuring the process of competition in India. Share-holding is not necessary for this purpose and it could be through a distribution agreement, price-fixing arrangement, or exclusive dealing agreements that have as their object the elimination of a competitor or partitioning the market. There are overseas cartels operating from different countries and engaged in conspiracies to carry out such anti-competitive practices that are the serious concern of industrially advanced countries and they are grappling with the problem of methods of cooperation in rendering these cartels ineffective, as it is well understood that domestic legislation has only territorial effect. The objective of the establishment is to regulate agreements likely to have an “Appreciable Adverse Effect on Competition” in India. Such acts may even take place outside India. This refers to the principle of extra-territorial jurisdiction. Section 32 of the Act provides that the Commission has the power to inquire into any agreement, abuse or combination has, or is likely to have, an appreciable adverse effect on competition in the relevant market in India. The Commission has jurisdiction to : i) Enquire into Anti-competitive Agreements (eg. Cartel, bid-rigging, etc.); ii) Enquire into Abuse of dominant position (eg. Predatory pricing, etc.); iii) Regulate Combinations (mergers/amalgamation, acquisition of shares or controls etc.); iv) Undertake Competition Advocacy (including advice to the Central Government on Competition policy issues. The jurisdiction of the Commission includes seeking compliance of its mandate by taking both enforcement and non-enforcement measures whereas the enforcement measures extend to enquiries and regulations, the non-enforcement measures includes undertaking competition advocacy, creating public awareness and imparting training on competition issues.The section offers no indication of the type of order that may be passed in such cases and the recommended action that would disable the person not resident in India from continuing his anti-competitive arrangement that has effect in India. It should have been specifically stated in the section itself.

The language of section 14 of the MRTP Act in this context may usefully be considered. It runs as follows: “Where any practice substantially follows within monopolistic, restrictive, or unfair, trade practice relating to the production, storage, supply, distribution or control of goods of any description or the provision of any services and any party to such practice does not carry on business in India, an order may be made under this Act, with respect to that part of the practice which is carried on in India. It is well recognized that declaring unlawful any agreement or practice and restraining the local enterprise that is a party to such an agreement is sufficiently effective to make the arrangement inoperative within the country enforcing its domestic law. This is how courts have been so far aided in giving effect to the provisions of any national law in such circumstances.

ISSUES REGARDING EXTRA-TERRITORIAL JURISDICTION UNDER COMPETITION LAW The application of a State’s antitrust laws to conduct outside that state raises several key issues. Some of the key issues being : 

First, it must be determined whether the law of a particular country (or subdivision



thereof) extends to conduct taking place outside its borders. Second, it must be confirmed whether any domestic court or tribunal has jurisdiction



to hear the matter. Third, if the law does have extraterritorial reach and a domestic court or tribunal has jurisdiction to hear the case, practical problems of enforcement of enforcement will arise, both with respect to the obtaining of evidence and the implementation of any fines or penalties.

EXTRA-TERRITORIAL APPLICATION AND ENFORCEMENT OF INDIAN COMPETITION LAW Section 32 of the Competition Act, 2002 we find that it makes provision with regard to extraterritorial jurisdiction of Indian Competition Authority. The Proviso of Section 18 states the Competition Commission may enter into any Memorandum or arrangement with the prior approval of the Central Government, with any agency of any foreign country in order to discharge its duty under the provisions of this Act. A treaty is different from an understanding. Thus the mandate of the Competition Commission extends beyond the boundaries of India.

In case any agreement that has been entered outside India and is anti-competitive in terms of sec.3 of the Act; or any party to such an agreement is outside India; or any enterprise abusing the dominant position is outside India; or a combination has taken place outside India; or any other matter or practice or action arising out of such agreement or dominant position or combination is outside India, if such agreement, combination or abuse of dominant position has or are likely to have an adverse effect on competition in the Indian market, the CCI shall have the power to inquire into such agreement, combination or abuse of dominant position has or are likely to have an adverse effect on competition in the Indian market, the CCI shall have the power to inquire into such agreement or dominant position or combination if have or are likely to have an appreciable adverse effect on competition in the relevant market in India. By looking at the language of Section 32 of the Competition Act, 2002 it may be concluded that in India also the ‘Effects Doctrine’ may be applied as it has been recognized under Section 32. Commission has notified the Competition Commission of India (General) Regulations 2009 so the process for the enforcement of extraterritorial jurisdiction shall be according to this regulation and the Code of Civil Procedure, 1908 wherever applicable.

INTERNATIONAL COOPERATION AND COORDINATION ON EXTRATERRITORIAL APPLICATION OF COMPETITION LAWS The Principles of public international law respects the sovereignty of independent states and do not recognizes the enforcement of laws of one sovereign into the other sovereign state without their will. It does not give an adequate answer to the problems that arise when true conflicts occur between competition authorities, and yet the scope for such conflicts could increase as more States adopt their own codes of competition law and as business becomes increasingly international. In order to resolve this problem some international organizations have come up with global cooperation and coordination network to curb such situation of discordant disputes arising out of extraterritorial application of various competition authorities. Some of these endeavors are considered belowICC action to resolve extraterritoriality problems8 Over the past two decades, ICC has voiced the concern of international business regarding the negative effects of extraterritoriality on world trade and investment. In 1986, ICC adopted 8 http://www.iccwbo.org/uploadedFiles/ICC/policy/trade/Statements/103-33%205%20Final.pdf, 01.00 PM

15/07/09,

a policy statement urging governments to avoid application of their laws to situations unconnected or only loosely connected with their territory and to promote intergovernmental consultation and cooperation to avoid and, where necessary, resolve extraterritoriality disputes. In the year 1986, ICC also established an international task force to prepare a report on the various aspects of extraterritoriality and its adverse consequences on international business.9 In recent years, ICC has continued to pursue its efforts against extraterritoriality, including by acting as amicus curiae before courts such as the U.S. Supreme Court in cases in which the extraterritorial application of national laws represented a threat to international commerce. World Trade Organisation Post war Havana charter for an International Trade Organisation contained an antitrust code. 10 However this was not incorporated into the Central Agreement on Trade of 1947, the organisation from which the WTO developed. The WTO was established on 1 January 1995, and is predominantly concerned with issues of trade, rather with competition policy. The relationship between trade and competition policy is a major subject I its own right, as is the debate as to the institutional mechanisms needed to deal with the new economic order. The rules of the WTO do not impose obligations on undertakings in relation to competition. A working group constituted by WTO has submitted its report in 2002, to study the interface between World Trade and competition policy. However, at the current stage it does not seem possible for WTO to initiate for a Global Authority in relation to competition matters but it is quite possible that its system of dispute settlement could be extended to competition law matters.11 International Competition Network A very appreciable step has been taken by United States Antitrust Authorities in order to explore the scope for collaboration among interested governments and international agencies to create a new venue in which ideas could be exchanged and work undertaken towards common solutions of competition law and policy problems.12 The report refers this initiative as ‗Global Competitive Initiative‘. This initiative would foster dialogue in relation to range 9 Extraterritorial Application of National Laws, 1987, Kluwer and ICC Publishing(This report has provided the basis for continued international dialogue promoting the importance of international comity and consultation and cooperation to further international trade and investment.) 10 Chapter V, A charter for World Trade; The Macmillan Company, 1949; P-231-327 11 Ehlermann and Ehring ‗WTO Dispute Sittlement and Competition Law, Fordham International Law Journal, 2003, P-1505. 12 Final report of the International Compettion Policy Advisory Committee to the US Attorney General and Assistant Attorney General for Antitrust, Published in February 2000, available at www.usdog.gov/atr/public/speeches/future.txt.

of matters, including the multilateralisation and deepening of positive comity; the development of consensus principles on best practice in relation to phenomena such as hardcore cartels, consideration and review of he scope of governmental exemptions and immunities from competition law, rationalization of system of merger notification and review, analysis of serious issues such as cartels and also the provision of dispute negotiation and technical assistance services. The ICPAC report led in October 2001, to the establishment of International Competition Network (ICN) as an international forum for competition law and policy. It works as a complementary to that of UNCTAD, the OEC, and the WTO. ICN is an informal, virtual network that seeks to facilitate cooperation between competition authorities and to promote procedural and substantive convergence of competition laws; steering group overseas the conduct of its business. Any national or international organization, responsible for the enforcement of competition law, can be its member.13

CONCLUSION A conclusion can be drawn that as MRTP Act did not make any provision with regard to extraterritorial jurisdiction which affected competition in India. The present legislative framework of the competition law of India is one step ahead to the framework of other economic super powers, like US, EU and Canada etc. The basis of this assertion is that the newly drafted Indian Competition Act is quiet unambiguous and resolves all lacunae of the competition laws of these countries. So far as extraterritorial jurisdiction of Competition Commission is concerned, the statute in very clear words gives the commission power of inquiry and to pass an order which the Commission deems fit irrespective of the territorial limits of the Commission. The Act also states that the Commission shall have power to regulate its own procedure. Thus, for the effective exercise of its power, Commission can adopt any procedure. As a result of these provisions Commission holds massive power to regulate competitive market in India. Extraterritorial jurisdiction of the commission, enshrined under section 32 of the Act, makes the Commission a Dynamic and powerful regulatory body. This is one of the core provisions of the Act. This Section has similar effects as Article 81 and 82 of EC treaty and section 1 and Section 2 of US Sherman Act have. The Competition Act no doubt makes the Commission a dynamic and powerful regulator but effective exercise of these powers can only prove the 13 Richard Which, Competition Law, , Oxford University Press, 6th edition, 2009, Pg-492.

commission a strong market regulator in reality. When the question of exercise of extraterritorial jurisdiction of Commission comes, the commission seems a little helpless because extraterritoriality depends more on the diplomatic relations with other jurisdictions. The recovery of monitory penalty imposed by exercising extraterritorial jurisdiction need a special regulation because it is an uncommon and special power of the Commission and so far this special regulation is notified by the Commission the General Regulation 2009 and Code of Civil Procedure shall be applicable.