Nepal's Competition Law: Objectives and Challenges

Nepal's Competition Law, which is the Competition Promotion and Market Protection Act, 2063 (2007), is the main legal instrument that regulates the competition and market practices in Nepal. The law was enacted in 2007 with the aim of making Nepal's economy more open, liberal, market-oriented, and competitive by maintaining fair competition between or among the producers or distributors of goods or services, enhancing national productivity by developing the business capacity of producers or distributors by way of competition, protecting markets against undesirable interference, encouraging 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 maintaining the economic interests and decency of the general public by doing away with possible unfair competition in trade practices.

The law establishes the Competition Promotion and Market Protection Board as the main authority for implementing and enforcing the law. The Board consists of seven members, including a chairperson appointed by the Government of Nepal, three ex-officio members from the Ministry of Industry, Commerce and Supplies, Ministry of Finance, and Ministry of Law, Justice and Parliamentary Affairs, and three experts nominated by the Government of Nepal from among the persons having experience in economics, commerce, industry or law. The Board has various powers and functions, such as issuing rules and guidelines, conducting inquiries and investigations, imposing penalties and remedies, issuing orders and directions, granting exemptions and approvals, etc.

The law prohibits various anti-competitive practices that may adversely affect the competition and market in Nepal. These include:

•  Abuse of dominant position: Any act or conduct by an enterprise that holds a dominant position in a relevant market that may prevent or restrict competition or harm consumers' interests. Examples of such acts or conduct include predatory pricing, discriminatory pricing or conditions, tying or bundling products or services, imposing unreasonable conditions or restrictions on trading partners, etc.

•  Cartel: Any agreement or arrangement between two or more enterprises that may prevent or restrict competition or harm consumers' interests. Examples of such agreements or arrangements include fixing prices or quantities, allocating markets or customers, rigging bids or tenders, boycotting competitors or customers, etc.

•  Unfair trade practices: Any act or conduct by an enterprise that may deceive or mislead consumers or harm their interests. Examples of such acts or conduct include false or misleading advertising, unfair terms or conditions, unfair quality or quantity standards, unfair discounts or rebates, etc.

•  Mergers and acquisitions: Any merger or acquisition between two or more enterprises that may create a dominant position in a relevant market or substantially lessen competition in that market. The law requires prior approval from the Board for any merger or acquisition that meets certain thresholds based on assets, turnover, market share, etc.

The law also provides for various exemptions and exceptions for certain practices that may be justified on public interest grounds. These include:

•  Government enterprises: Any act or conduct by an enterprise owned or controlled by the Government of Nepal that is necessary for fulfilling its public duties or obligations.

•  Small enterprises: Any act or conduct by an enterprise that falls below certain thresholds based on assets, turnover, employees, etc., that is necessary for its survival or growth.

•  Joint ventures: Any agreement or arrangement between two or more enterprises that is necessary for achieving efficiency gains, innovation benefits, export promotion, etc.

•  Intellectual property rights: Any act or conduct by an enterprise that is necessary for protecting its intellectual property rights granted under the law.

The law also provides for various remedies and penalties for violations of the law. These include:

•  Cease and desist orders: Orders issued by the Board to stop any act or conduct that violates the law.

•  Divestiture orders: Orders issued by the Board to sell off any assets or shares that result from an illegal merger or acquisition.

•  Compensation orders: Orders issued by the Board to pay compensation to any person who suffers loss or damage due to a violation of the law.

•  Fines: Monetary penalties imposed by the Board for any violation of the law. The maximum fine is 10 percent of the annual turnover of the enterprise involved in the violation.

•  Imprisonment: Criminal sanctions imposed by the court for any violation of the law. The maximum imprisonment is three years.

However, despite having a comprehensive legal framework for competition law in Nepal, there are still many challenges and issues in its implementation and enforcement. Some of these include:

•  Lack of awareness and understanding: Many enterprises and consumers are not aware of their rights and obligations under the law. They are also not familiar with the procedures and processes involved in filing complaints or seeking remedies.

•  Lack of resources and capacity: The Board lacks adequate human and financial resources to carry out its functions effectively. It also lacks technical expertise and experience to deal with complex cases involving economic analysis, market definition, etc.

•  Lack of coordination and cooperation: The Board faces difficulties in coordinating and cooperating with other government agencies, such as the Ministry of Industry, Commerce and Supplies, the Department of Commerce, the Department of Customs, etc., as well as with other stakeholders, such as the private sector, civil society, academia, media, etc.

•  Lack of transparency and accountability: The Board lacks transparency and accountability in its decision-making and reporting. It also lacks mechanisms for public consultation and participation in its activities.

Therefore, it is important for Nepal to address these challenges and issues and improve its competition law regime. This would require a holistic and multi-stakeholder approach that involves various actions, such as:

•  Raising awareness and understanding: Conducting awareness campaigns and training programs for enterprises and consumers on the benefits and importance of competition law. Providing guidance and assistance for filing complaints or seeking remedies.

•  Enhancing resources and capacity: Increasing the budget and staff of the Board. Providing training and capacity building for the Board members and staff on technical and legal aspects of competition law. Hiring or consulting experts or consultants for complex cases.

•  Improving coordination and cooperation: Establishing formal and informal channels of communication and collaboration with other government agencies and stakeholders. Participating in regional and international forums and networks on competition law.

•  Strengthening transparency and accountability: Publishing annual reports and statistics on the Board's activities and outcomes. Establishing feedback and grievance mechanisms for the public. Conducting periodic reviews and evaluations of the Board's performance.

By addressing these challenges and issues and improving its competition law regime, Nepal can promote fair competition and market protection in its economy. This can help Nepal achieve its economic growth and development goals.