Enactment Of Laws On Competition

Aakriti Khanal

Competition is significant means to ensure rivalry among business firms in economy sphere to protect the interest of consumers. As every developing nation was going through the process of privatisation and liberalisation, competition law and regulatory tools were conjured in many countries in order to deal with firms’ behaviour and market failure. It is challenging task for the country with emerging economy to enact the competition laws and enforce it.

Abusive practices
There are two important things that every developing nation must have with a specific end goal to guarantee competitive culture in the market economy. First includes substantive rule enactment forbidding anti-competitive behavior and abusive practices by monopolistic firms and their accumulative and adverse effect on competition.
Second includes existence of powerful and proficient enforcement mechanism which is competition authority. In this regard Nepal provides for the substantive rules and enforcement mechanisms with objectives to ensure competition in the market and to protect the interest of consumers.
However, in present days main issue is the weak enforcement of Competition Promotion and Market Protection Act 2007. The big question that is raised is why this decade long enacted legislation isn’t becoming familiar among lawyers, judges and law students in Nepal despite flagrant breach of prevailing legislation?
Anti-competitive practice, cartel, bid rigging, bundling, collusion or strategic behaviour of selling below cost and tie-in arrangement are common in Nepali market which has remained unchecked despite having competition legislation. Further there is no calculation of adverse effect that a merger of two companies may emit upon the competition prevailing in the market.
Though the Supreme Court and government have taken step to end cartel as imposing serious threat to the interest of consumers, it is yet to be enforced effectively.
The components driving towards the enactment of competition legislation in Nepal incorporates both internal and external factors. External factors include commitment made by the Nepali government to enact competition legislation with accession to WTO membership. Internal factors include adoption of competition law and policy in line with the liberalisation and privatisation policy which is the key for improvement of market economy during 1990’s. It is further motivated by the constitutional principles.
However, the enforcement of legislation depends upon three major factors, i.e. good piece of legislation enacted depending upon the prevailing market practices, establishment of fair and efficient enforcing agency and judicial review in the respective countries. The enactment of separate competition legislation, 2007 in Nepal was considered to be the welcoming step to ensure the competitive culture whose major objectives is to make national economy more open, liberal, market-oriented and competitive by maintaining fair competition and to protect the interest of consumers.
However, the status of its enforcement is almost nil. It is being realised that the current legislation itself needs to be reviewed if we want to see our Nepali market competitive, benefitting the consumers and economy of the nation. The Act lacks definition of various terms that are, to a great degree, crucial to consider any Act as unfair and prejudicial to the competition prevailing in the market. The Act has failed to define and allocate relevant geographical and relevant product market which is very essential to determine any act of monopolistic firms as abuse of dominant position. Further, it does not separately provides for the extraterritorial application of the Act which is essential in order to entertain the act taking place outside Nepal but having adverse impact on competition in Nepal and various factors that is necessary to hold any act as anti-competitive.
These shortcomings and non-implementation of legislation itself proves the statement that enactment of competition legislation is not enough but its enforcement by independent competition authority fully equipped with resources and budget is a must. Competition Promotion and Market Protection Board is composed of members who fill the vacant seat from political appointment where member is responsible to handle two offices. This political appointment seems weak before the composition of competition of neighbouring country, India, which is made up of the officials nominated by the separate selection committee where there is more chance of getting designated person having special knowledge on competition law and other related areas. This makes a huge difference in the working capacity.
Thus, competition legislation is considered as inevitable to ensure competitive market in Nepal. However, its enforcement depends largely upon huge caution and efforts from the government side. There are certain limitations in the legislation and this is the reason why experts consider it as the reason behind hindrance in the enforcement.

Rationale
Therefore, it is high time for Nepal to review the provisions and make certain amendments in order to enforce it completely. More importantly, the composition of competition promotion board needs to be revisited so that competent and full time members could devote time to enforce the competition legislation of Nepal. Thus, if reformative steps are not adopted, the rationale behind the enactment of this legislation would go in vain.

 

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