OECD kpcdb

1. Competition Law

 

The Consumer Affairs Authority Act, No. 9 of 2003 (“the Act”) came into effect in April 2003.

 

The objectives of the Act are: (i) to provide for the better protection of consumers through the regulation of trade and the prices of goods and services, (ii) to protect traders and manufacturers against unfair trade practices and restrictive trade practices, and (iii) to promote competitive pricing wherever possible and ensure healthy competition among traders and manufacturers of goods and services.

 

The Act provides general provisions covering a number of restrictions under Section 8, such as restrictive trade agreements among enterprises, arrangements amongst enterprises with regard to prices, abuse of dominant position with regard to domestic trade or economic development within the market or in a substantial part of the market but also any restraint of competition adversely affecting domestic or international trade or economic development.

 

The scope of the Act does not only cover acts affecting competition but also price controls as well as unfair trade practices. 

 

Sri Lanka has features of both the common law system as well as the civil law system.

 

General exclusion: There is no sector excluded or exempted from the application of the Act. State-owned enterprises are not exempt from the application of the Act when conducting commercial activities in competition with private firms. 

 

Extra-territorial application: The Act does not have extra-territorial reach. The Act does not apply to firms located outside Sri Lanka’s jurisdiction even if the acts directly affect competition and/or consumers in Sri Lanka. Also, the merger control rules do not apply to foreign mergers.

 

2. Consumer Affairs Authority and the Consumer Affairs Council

 

The Act establishes two administrative bodies, the Consumer Affairs Authority (CAA), and the Consumer Affairs Council (the Council). According to Section 2 (2) of the Act, only the former constitutes a body corporate. The Council administratively functions under the CAA. There is an internal structural separation which confers an investigative role to the CAA and a decision making (adjudicative) role to the Council. 

 

CAA has investigative powers to investigate anti-competitive practices either on own motion or as a result of a complaint. After the investigation, the matter can be referred to the Council for determination since it has adjudicative powers. The main consideration when determining a matter would be whether the ACP operates against public interest. CAA may decide not to refer matters to Council and in such a situation, the matter could be referred to Council at the request of the complainant who made the complaint.

 

The Consumer Affairs Authority (CAA): The CAA is the enforcer of the Act, and is the government organisation under the Ministry of Industry and Commerce mandated to protect consumers’ interests and to ensure fair market competition in Sri Lanka.

 

Under Section 7 of the Act, the CAA’s main objectives are: (i) to protect consumers against the marketing of goods or the provision of services, (ii) to protect consumers against unfair trade practices and guarantee that consumers interest shall be given due consideration, (iii) to ensure that wherever possible consumers have adequate access to goods and services at competitive prices, and (iv) to seek redress against unfair trade practices, restrictive trade practices or any other forms of exploitation of consumers by traders.

 

Organisational structure of CAA: The CAA, whose headquarters is located in Colombo, has approximately 328 staff members as of 31 December, 2016. It had a budget of LKR 304 million. The CAA comprises four main operational divisions: Consumer Affairs and Information, Competition Promotion, Pricing and Management, and Compliance & Enforcement. Of those main divisions, Competition Promotion Division is in charge of the anti-competitive practices.

 

Section 3 sets forth that the Authority shall consist of a Chairman and not less than ten other members, three of whom are to be appointed as full-time members, who shall be appointed by the Minister from among persons who possess recognised qualifications. As per Section 5, the Director-General of the Authority shall act as the Secretary to the Authority.

 

The Consumer Affairs Council (the Council): As per Section 39, the Council shall consist of a person with experience in commercial law, a person with experience in the management of business enterprises, and an economist with experience in trade practices and consumer affairs. 

 

Organisational structure of the Council: The Council consists of three members, one of whom shall be nominated as Chairman by the Minister. The members hold office for a period of three years and their appointment as well as the fixing of their remuneration is determined by the Minister in consultation with the Minister of Finance.

 

Other regulators with competition powers: Public Utilities Commission (Water, Electricity, and Petroleum) (has powers for anti-competitive practices, monopolies, acquisitions, abuse of dominance and mergers), Securities & Exchange Commission (Securities, looks only at mergers from a shareholder’s interest perspective), and Telecommunications Regulatory Commission (Telecommunications) are the sector regulators that have competition powers. Each commission regulates anti-competitive practices, abuse of dominance, and mergers in the respective field in accordance with its own legislation.

 

Competition advocacy: The CAA plays an active role in competition advocacy. It has performed at least one market/sector study in the last five years. If a market/sector study identifies an obstacle or a restriction to competition caused by an existing public policy, the study can include an opinion/recommendation to the government to remove/reduce such obstacle or restriction. 

 

International co operation: The CAA has signed no international co operation agreement or MoU regarding competition law

 

3. Investigation

 

Initiation of investigation: Section 34 (1) sets forth that the Authority may either of its own motion or on a complaint or request made to it by any person, any organisation of consumers or an association of traders, carry out an investigation with respect to the prevalence of any anti-competitive practices. It shall be the duty of the Authority to complete an investigation, within one hundred days of its initiation under Section 34 (2).

 

Powers of investigation: After receiving complaints, the CAA officials may conduct investigations, and the CAA can perform unannounced inspections/searches in the premises of firms investigated for a possible antitrust infringement aimed at gathering evidence without a warrant. 

 

According to Section 36 (2), for the purpose of conducting an investigation under Section 33, the CAA shall have all the powers of a District Court to issue notices and require the attendance of any witness, to require the production of documents or records and to administer any oath or affirmation to any witness.

 

Under Section 37, the Authority may make an application to the Council upon the conclusion of an investigation. Section 38 stipulates that if the Authority decides not to make an application to the Council, the person at whose request such investigation was carried out may request the Council to call upon the Authority to submit to the Council its report on the investigation.  

 

Where the Council is of the opinion that there is sufficient material in the report to warrant it to take up the application, the asking party may request that the Council hear and decide on the matter. 

 

With regards to evidence, Section 44 provides that the Council shall have the power to procure and receive all such evidence, written or oral, and to examine any persons as witnesses. The Council may also require said evidence to be given on oath or affirmation. 

 

Failure to comply with investigation: Under Section 36 (3), where any person interferes with the lawful process of the CAA, or in the course of an investigation fails without cause, (i) to appear before the Authority at the time and place specified in any notice issued by the Authority to such person (ii) to answer any questions put to him relating to the matter being investigated by the Authority or (iii) to produce and show to the Authority any document or record which is in his possession or control, and which in the opinion of the Authority is relevant to the matter being investigated by the Authority, such person shall be guilty of an offence of contempt against or in disrespect of the Authority and shall be punishable for such offence by the Court of Appeal. 

 

Concerning the Council, any person upon whom a notice is issued under Section 43 fails without cause which the Council deems reasonable, to appear before the Council at the time and place mentioned in the notice, refuses to be sworn-in or affirmed, or having been sworn-in or affirmed refuses or fails without cause to answer any questions to the matters being inquired or investigated, or refuses or fails without cause deemed reasonable by the Council to produce any document or other thing which is in his possession or power and which the Council deems necessary for the investigation, shall be guilty of the offence of contempt against or in disrespect of the Council. 

 

Procedural fairness: As per Section 36 (1), the Authority may give to all persons including representatives of associations or organisations of consumers interested in a matter which forms the subject of an investigation with respect to the prevalence of any anti-competitive practice, an opportunity of being heard and of producing such evidence, oral or documentary, as in the opinion of the Authority is relevant to such matter. 

 

The CAA publishes procedural guidelines explaining its investigative procedures only for internal use. Also, the parties have the right to be heard and present evidence before the imposition of any sanctions or remedies for having committed an antitrust infringement.

 

4. Remedies and Sanctions 

 

Remedies and administrative sanctions: As per Section 41 (1), where an application is made to the Council, as the case may be, the Council shall, on being satisfied that (a) an anti-competitive practice exists but such anti-competitive practice does not operate or is not likely to operate against public interest, by order authorise such anti-competitive practice; or (b) an anti-competitive practice exists and that it operates against public interest, by order provide for the termination of such anti-competitive practice in such manner as may be specified in the order, and such other actions as the Council may consider necessary for the purpose of remedying or preventing the adverse effects of any anti-competitive practice.

 

Criminal sanctions: Under Section 60 (2) (a), any person who fails or refuses to comply with an order made under Section 41 (1) (b), or acts in contravention of such order, shall be guilty of an offence under this Act, and shall on conviction after trial before a Magistrate be liable (i) where such person is not a body corporate, to a fine ranged from 5,000 to 50,000 rupees or to imprisonment for less than one year or to both such fine and imprisonment in the case of a first offence, and to a fine ranged from 10,000 to 100,000 rupees or to an imprisonment for less than two years or to both such fine and imprisonment in the case of a subsequent offence or (ii) where such person is a body corporate, to a fine ranged from 50,000 to 1,000,000 rupees in the case of a first offence, and to a fine ranged from 100,000 to 2,000,000 rupees in the case of subsequent offence.

 

5. Appeal

 

In accordance with Article 138 of the Sri Lankan Constitution, any errors of fact or of law which have been committed by the High court, or any Court of First Instance, tribunal or other institution (such as the CAA or the Council) may be brought before the Court of Appeals for correction.

 

6. Private enforcement 

 

Private parties do not have the possibility to seek compensation for damages resulting from a breach of the Act. Moreover, private lawsuits to prohibit anti-competitive behaviour by an interested party or a third party are not available

 

 

* This information is based on Competition Law in Asia-Pacific: A Guide to Selected Jurisdictions (2018).