OECD kpcdb

1. Competition Law

 

The Competition Promotion and Market Protection Act, 2063 (the “Act”) came into force on January 14, 2007 and is the main legal instrument governing competition policy in Nepal. 

 

The purpose of the Act is to make the national economy more open, liberal, market-oriented and competitive by maintaining fair competition between or among the persons or enterprises producing or distributing goods or services, to enhance national productivity by developing the business capacity of producers or distributors by way of competition, to protect markets against undesirable interference, to encourage to make the produced goods and services available to the consumers at a competitive price by enhancing the quality of goods or services by way of controlling monopoly and restrictive trade practices, and to maintain the economic interests and decency of the general public by doing away with possible unfair competition in trade practices.

 

The Act prohibits anti-competitive agreements (Section 3), abuse of dominant position (Section 4) and merger and amalgamation with intent to control competition (Section 5) under Chapter 2 (anti-competitive practices).

 

Section 7 prohibits exclusive dealing, Section 8 covers market restriction (entering into any transaction as to restrict the market of the production or distribution of such goods or services) and Section 9 prohibits tied selling, which all can cover the abuse of superior bargaining position by a non-dominant firm.

 

General exclusion: Section 11 of the Act sets forth that the Act shall not apply to the following business or trade activities: business relating to cottage and small industries as referred to in the Industrial Enterprise Act, 2049; agricultural products produced by such small farmers as prescribed, and agricultural co operative business; procurement of raw materials; export business; activity to be done for the labour’s right to collective bargaining; research and development related activity; management collaboration; and collaboration made for organisational and procedural improvements intended to enhance trade capacity.

 

In addition, as per Section 30 (Special power of Government of Nepal), where there arises any crisis in the production or distribution of any goods or services in Nepal, the Government of Nepal may, by notification in the Nepal Gazette, issue necessary orders waiving the application of any provisions contained in Chapter 2. 

 

Extra-territorial application: Section 1 of the Act prescribes that the Act shall apply to any person who commits an act contrary to the Act in any place outside Nepal. 

 

2. Competition Promotion and Market Protection Board and Department of Commerce

 

The Competition Promotion and Market Protection Board (“the Board”) is responsible for the investigation of cases and for prosecuting alleged infringement in the courts (articles 22 and 24), that take decisions. Nepal therefore has a bifurcated adversarial model.

 

It is the commercial bench of such a court as designated by the Government of Nepal, in consultation with the Supreme Court that has the power to try and settle cases under this Act. 

 

In addition to competition policy, the Board is responsible for enforcing Consumer rights Acts and Rules, Public Procurement Act and Rules, etc. 

 

Organisational structure of the Board: 

 

Located in Kathmandu, the Department of Commerce at the Ministry of Commerce acts as the secretariat of the Board. In addition, 75 district administration offices are responsible for enforcing the Act, where a market protection officer designated by the government has the power to investigate competition cases. 

 

The secretary of the Ministry of Commerce (the former Ministry of Industry, Commerce and Supplies) is the Chairperson of the Board and the appointment may be renewable. The Board shall also include 9 Members. The representatives of Ministry of Law, Justice and Parliamentary Affairs, the Ministry of Finance, and Ministry of Commerce shall serve as members, as well as six persons nominated by the government of Nepal relating to industry, commerce or consumer rights shall form other Members of the Board. The director general of the Department of Commerce, at the Ministry of Commerce shall serve as Member Secretary.

 

Members of the Board are assigned for two years, but they can be removed at any time by the Government of Nepal. 

 

Other regulators with competition powers: There are other sector regulators that have competition powers. Office of Prime Minister, Home Ministry, Ministry of Commerce, Ministry of Finance, Ministry of Industry, Public Procurement Monitoring Office (PPMO), etc. are responsible.

 

Competition advocacy: The Board is also responsible for competition advocacy, undertake market studies, formulate competition policies which are submitted to the government, reviewing competition-related laws, and giving necessary suggestions to the government. 

 

International co operation: The Board has not concluded any international co operation agreements nor MoUs with foreign competition authorities.

 

3. Investigation

 

Initiation of investigation: Section 23 of the Act says that where any person or enterprise contravenes the Act, any person who has the information of such contravention may make a complaint to the Board or the market protection officer. When the market protection officer receives such a complaint, the officer shall make investigation of and inquiry into that case. If the Board receives such a complaint, the Board shall send such complaint to any market protection officer for necessary action or make investigation or inquiry on its own by forming a sub-committee. Section 24 sets out that the investigation may also be started ex-officio. 

 

Powers of investigation: Section 22 of the Act stipulates that the Government of Nepal may, by notification in the Nepal Gazette, designate any officer employee as the market protection officer in any required district of the State of Nepal for investigating and inquiring cases relating to any offences punishable under this Act and filing cases in the Court.

 

Section 25 prescribes that where there is a reasonable ground to believe that any person contravening this Act or the Rules framed under this Act or a complaint is received in relation thereto, the market protection officer or sub-committee formed by the Board may inspect, inquire or search the concerned place. 

 

Section 27 prescribes that where it is necessary to seek assistance of an expert in the course of investigation of and inquiry into any offence, the investigating sub-committee or the market protection officer may seek the service of the concerned expert.

However, the market protection officer or sub-committee formed by the Board cannot compel firms investigated for a possible antitrust infringement to provide information nor force third parties to provide information to help an investigation on an antitrust infringement. It cannot make unannounced inspections in the premises of firms investigated for a possible antitrust infringement aimed at gathering evidence.

 

As per Section 24, the market protection officer shall file the case in the Court no later than 35 days after the date of completion of the investigation. In case of sub-committee, the sub-committee shall order any market protection officer to file a case in the court upon the completion of its investigation. 

 

In filing the case pursuant to Section 24, the market protection officer shall consult the government attorney. Any case filed in the Court shall be pleaded and defended by the government attorney.

 

Failure to comply with investigation: Section 19 of the Act stipulates that regarding an obstruction in any act or action pertaining to investigation of and inquiry into any offence under the Act, the Court may, based on a report of the market protection officer, punish such person with a fine not exceeding 25,000 rupees.

 

Procedural fairness: The Act contains no provision on procedural rules. However, there are certain rules to ensure procedural fairness, according to the answer provided Nepal to the OECD/KPC survey.

 

The Board publishes procedural guidelines or public documents explaining its investigative procedures. There are published administrative guidelines that explain how monetary sanctions for antitrust infringements are set by the Board.

 

Confidentiality: The Board or market protection officer must keep confidential any business transactions and information which it receives through an informer in the course of an inspection, monitoring, investigation or inquiry pursuant to the Act.

 

4. Remedies and sanctions

 

Nepal has an adversarial system. The Board investigates while the Court adjudicates. As mentioned in Section I.2, the Board cannot impose fines for antitrust infringement as it is for the Court to try and settle cases under this Act. 

 

Fines: Section 17 stipulates that any person or enterprise that does or causes an anti-competitive agreement, abuse of dominant position, anti-competitive merger etc., shall be subject to a fine not exceeding NPR 500,000, and such activity shall be void.

 

Injunction: As per Section 31, where the Court is informed by the market protection officer or the Board that an immediate serious adverse condition may arise in the supply or distribution of any goods or services in the market unless any activity about to be done by person in contravention of this Act is stopped immediately and where the Court is satisfied with that matter, the Court may issue an order to stop such activity immediately. 

 

5. Appeal

 

Decisions on antitrust infringements and mergers are not subject to judicial review. 

 

6. Private enforcement 

 

Section 29 prescribes that where any person suffers any kind of loss or damage as a result of any offence under the Act, that person may make a petition to the Court for the award of compensation for such loss or damage.