Competition Law in Nepal: Act 2063, Rules & Penalties

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Updated: March 12, 2026
Nepal Divorce Services

The Competition Promotion and Market Protection Act 2063 (2007) is Nepal's principal competition law. It regulates anti-competitive practices, prevents abuse of market dominance, prohibits cartels and bid rigging, and controls mergers that could substantially reduce competition. The Act applies to all enterprises operating in Nepal and has extra-territorial application — meaning it covers acts committed outside Nepal that affect the Nepali market.

This guide explains what the Act prohibits, how enforcement works, the penalties for violations, who is exempt, and how to file a complaint.

Overview of the Competition Promotion and Market Protection Act 2063

Aspect	Details
Full name	Competition Promotion and Market Protection Act 2063 (2007)
Objective	Make Nepal's economy more open, liberal, market-oriented, and competitive by maintaining fair competition
Scope	All enterprises producing or distributing goods or services in Nepal, including subsidiaries and affiliates
Extra-territorial reach	Applies to any person who commits an act contrary to the Act outside Nepal (Section 1)
Enforcement body	Competition Promotion and Market Protection Board (CPMPB)
Adjudication	Commercial bench of designated courts — the Board investigates, the Court decides
Supporting regulations	Rules on anti-competitive agreements, dominant position abuse, mergers, bid rigging, exclusive dealing

What the Act Prohibits

1. Abuse of Dominant Position (Sections 4–5)

An enterprise holding a dominant position in a relevant market is prohibited from acts that prevent or restrict competition or harm consumer interests:

Prohibited Conduct	Example
Predatory pricing	Selling below cost to drive competitors out of the market
Discriminatory pricing or conditions	Charging different prices to similar customers without justification
Tying or bundling	Forcing buyers to purchase Product B as a condition of buying Product A
Unreasonable restrictions on trading partners	Imposing exclusive supply or territory restrictions that eliminate competition
Limiting production or supply	Deliberately restricting output to inflate prices
Refusing to deal	Unjustified refusal to supply goods or services to competitors or customers

2. Anti-Competitive Agreements / Cartels (Sections 6–7)

Agreements between two or more enterprises that prevent, restrict, or distort competition are prohibited:

Type of Agreement	What It Means
Price fixing	Competitors agree to set, raise, or maintain prices rather than competing
Output limitation	Competitors agree to restrict production quantities
Market allocation	Competitors divide markets, customers, or territories among themselves
Bid rigging	Competitors coordinate tenders so that a predetermined bidder wins
Boycotts	Competitors agree to collectively refuse dealing with certain suppliers or customers
Information sharing	Competitors exchange competitively sensitive information (pricing, strategy, costs)

3. Unfair Trade Practices (Section 8)

Practice	Example
False or misleading advertising	Making false claims about product quality, origin, or pricing
Unfair terms and conditions	Imposing one-sided contract terms on consumers or trading partners
Unfair quality or quantity standards	Selling products below stated quality or in less than stated quantity
Unfair discounts or rebates	Offering discriminatory discounts to certain buyers to exclude competitors
Deceptive trade practices	Misrepresenting goods or services to consumers

4. Mergers and Acquisitions (Sections 9–10)

Any merger or acquisition that may create a dominant position or substantially lessen competition requires prior approval from the Board. The Board assesses whether the merger would harm competition based on factors including market share, barriers to entry, and impact on consumers.

The Competition Board: Structure and Powers

Aspect	Details
Chairperson	Secretary of the Ministry of Commerce
Members	9 total — representatives from Ministry of Law, Ministry of Finance, Ministry of Commerce, plus 6 nominated persons from industry, commerce, and consumer rights
Member Secretary	Director General of the Department of Commerce
Term	2 years (removable by Government of Nepal)
Investigation power	Board investigates through designated Market Protection Officers (Section 22)
Prosecution power	Board files cases in the designated commercial bench of the Court
Penalty power	Board cannot impose fines directly — only the Court can adjudicate penalties
Emergency power	Board can request the Court to issue immediate stop/stay orders (Section 31)

Key point: Nepal has a bifurcated adversarial system — the Board investigates and prosecutes, but it is the Court that tries cases and imposes penalties. This is different from many countries where the competition authority itself can impose fines.

Penalties for Violations

Violation	Penalty	Imposed By
Abuse of dominant position	Fine up to 10% of annual turnover of the enterprise	Court
Cartel / anti-competitive agreement	Fine up to 10% of annual turnover	Court
Bid rigging	Fine up to 10% of annual turnover + potential criminal prosecution	Court
Unfair trade practices	Fine up to 10% of annual turnover	Court
Illegal merger (without Board approval)	Divestiture order + fine up to 10% of turnover	Court
Criminal liability (severe cases)	Imprisonment up to 3 years	Court
Non-compliance with Court orders	Contempt proceedings + additional penalties	Court

In addition to fines and imprisonment, the Court can issue: cease and desist orders (to stop the anti-competitive conduct), divestiture orders (to sell off assets from illegal mergers), and compensation orders (to pay damages to victims).

Who Is Exempt from the Act?

Section 11 of the Act exempts certain activities from its provisions (except unfair trade practices under Section 10):

Exemption	Rationale
Cottage and small industries (under Industrial Enterprises Act 2049)	Protecting small businesses from regulatory burden
Agricultural products by small farmers and agricultural cooperatives	Supporting rural livelihoods
Government enterprises fulfilling public duties	State functions take precedence
Joint ventures for efficiency, innovation, or export promotion	Encouraging economic development
Collaborations for organizational improvements to enhance trade capacity	Promoting competitiveness
Intellectual property rights (legitimate exercise)	Respecting IP law — but abuse of IP is still regulated (Section 32)

Important: Even exempt entities remain subject to unfair trade practices provisions (Section 10). The exemption covers anti-competitive agreements and dominant position abuse only.

How to File a Competition Complaint

Step	Details
1. Prepare your complaint	Document the anti-competitive conduct with evidence: pricing data, contracts, communications, market analysis, or witness statements
2. File with the Board or Market Protection Officer	Under Section 23, any person with information about a violation can file a complaint with the Board or the designated Market Protection Officer in the relevant district
3. Anonymity option	If you wish to keep your identity secret, the Board must protect your name (Section 23(2))
4. Board investigation	The Board or Market Protection Officer investigates, gathers evidence, and conducts inquiries
5. Court filing	If the Board finds sufficient evidence, it files the case in the designated commercial bench of the Court (Section 24)
6. Court proceedings	The Court follows Summary Procedures Act 2028 for trial. Both parties present evidence and arguments
7. Judgment and remedies	Court can impose fines (up to 10% turnover), imprisonment (up to 3 years), cease and desist orders, divestiture, and compensation

Government Emergency Powers

Under Section 30, where a crisis arises in the production or distribution of goods or services in Nepal, the Government may issue a notification in the Nepal Gazette waiving application of anti-competitive practice provisions in Chapter 2. This emergency power allows the Government to temporarily override competition rules during supply chain crises, natural disasters, or economic emergencies.

Under Section 31, where the Board or Market Protection Officer informs the Court that an immediate serious adverse condition may arise unless an anti-competitive activity is stopped immediately, the Court can issue an emergency stop/stay order.

Competition Law and Business Disputes

Competition law disputes often arise alongside other business and commercial litigation matters. Common scenarios include:

Scenario	Competition Law Implication
Distributor terminated by a dominant supplier	Potential abuse of dominant position — refusal to deal or discriminatory treatment
Competitor undercutting prices below cost	Potential predatory pricing if the competitor holds a dominant market position
Tender awarded to same company repeatedly despite lower competing bids	Potential bid rigging — criminal offence
Business partner imposing exclusive dealing restrictions	Anti-competitive vertical agreement restricting market access
Product counterfeiting or deceptive labelling	Unfair trade practice — also implicates Consumer Protection Act 2075 / MRP law
Divorce involving jointly owned business with market dominance	Property division during divorce may trigger merger/divestiture notification requirements if business ownership changes substantially

At Nepal Divorce Services, our civil litigation team handles business disputes including competition-related matters. Contact us for a consultation.

Key Legal References

Law / Document	Relevance
Competition Promotion and Market Protection Act 2063 (2007)	Primary competition law — Sections 4–10 (prohibited practices), 11 (exemptions), 12–21 (Board), 22–28 (enforcement), 29–32 (special powers)
Competition Promotion and Market Protection Rules	Detailed procedures for anti-competitive agreements, dominant position, mergers, bid rigging, exclusive dealing
Consumer Protection Act 2075	Consumer rights and unfair trade practices — overlaps with Section 8/10 of Competition Act
Industrial Enterprises Act 2076	Defines cottage/small industries exempt from Competition Act
Summary Procedures Act 2028	Procedural law followed by Court in competition cases
National Civil Code 2074	Compensation and contract provisions applicable to competition-related damages

Frequently Asked Questions

Nepal's competition law is the Competition Promotion and Market Protection Act 2063 (2007). It regulates anti-competitive practices, prevents abuse of market dominance, prohibits cartels and bid rigging, and controls mergers that could substantially reduce competition in Nepal.

The Competition Promotion and Market Protection Board (CPMPB) is the enforcement body. However, Nepal has a bifurcated system — the Board investigates and prosecutes cases, but only the designated commercial bench of the Court can impose penalties and adjudicate cases.

The Court can impose fines of up to 10% of the annual turnover of the enterprise involved. For severe cases, imprisonment up to 3 years is possible. The Court can also issue cease and desist orders, divestiture orders (for illegal mergers), and compensation orders for victims.

Bid rigging is when competitors coordinate tenders so that a predetermined bidder wins. It is prohibited under the Competition Act 2063. Penalties include fines up to 10% of annual turnover and potential criminal prosecution with imprisonment up to 3 years.

When an enterprise holding a dominant market position engages in conduct that restricts competition or harms consumers — such as predatory pricing, discriminatory pricing, tying products, or refusing to deal — it constitutes abuse of dominant position under Sections 4–5 of the Competition Act 2063.

Yes. Agreements between competing enterprises that fix prices, limit output, allocate markets, rig bids, or boycott competitors are prohibited under Sections 6–7 of the Competition Promotion and Market Protection Act 2063. Violators face fines up to 10% of annual turnover and imprisonment up to 3 years.

Yes. Any merger or acquisition that may create a dominant market position or substantially lessen competition requires prior approval from the Competition Board. Completing a merger without approval can result in a divestiture order and fines up to 10% of annual turnover.

Exemptions under Section 11 include: cottage and small industries, agricultural products by small farmers and cooperatives, government enterprises fulfilling public duties, joint ventures for efficiency or export promotion, and legitimate exercise of intellectual property rights. However, all entities remain subject to unfair trade practices provisions.

Any person with evidence of anti-competitive conduct can file a complaint with the Competition Board or the designated Market Protection Officer in the relevant district (Section 23). You can request anonymity — the Board must keep your identity secret. The Board investigates and files the case in Court if evidence is sufficient.

No. Under Nepal's bifurcated system, the Board investigates and prosecutes but cannot impose fines. Only the designated commercial bench of the Court has the power to try cases, impose fines (up to 10% turnover), order imprisonment (up to 3 years), and issue remedial orders.

Yes. Under Section 1, the Act has extra-territorial application — it applies to any person who commits an act contrary to the Act in any place outside Nepal. This means foreign enterprises whose anti-competitive conduct affects Nepal's market can be prosecuted.

Unfair trade practices include false or misleading advertising, deceptive trade practices, unfair contract terms, selling products below stated quality or quantity, and discriminatory discounts. These are prohibited under Section 8 of the Act and apply to all enterprises — including those otherwise exempt from the Act.

Yes. Under Section 30, when a crisis arises in the production or distribution of goods or services, the Government may issue a Nepal Gazette notification waiving anti-competitive practice provisions. Under Section 31, the Court can issue emergency stop/stay orders if immediate serious adverse conditions are threatened.

The Government designates Market Protection Officers in districts across Nepal (Section 22) to investigate and inquire into competition law offences and file cases in Court. They work under the direction of the Competition Board and serve as the frontline enforcement mechanism.

Yes. Competition cases involve complex economic analysis, market definition, and evidentiary requirements. Whether you are filing a complaint against anti-competitive conduct or defending against allegations, legal representation is essential. Contact Nepal Divorce Services for a consultation on business disputes.

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