IRACST – International Journal of Commerce, Business and Management (IJCBM), ISSN: 2319–2828

Vol. 3, No. 1, February 2014

‘Effects Doctrine’&Competition patronage of [Link] in

economics is a condition that is present in
Regulators: A Comparative Study.
markets where buyers and sellers interact
Shankar Singh Yadav1(Author) to establish prices and exchange goods and
services. Economic competition is the
Department of Law, means whereby the self-interest of buyers
and sellers acts to serve the needs of
Ch. Devi Lal University, society as well as those of individual
Sirsa, Haryana, India. market participants. Competition puts
producers or manufacturers under constant
Abstract: pressure to offer the best possible range of
goods and the provisions of services at the
The issue of extra-territorial best possible prices, because if they don't,
jurisdiction of the competition consumers have the choice to shift to
regulators/authorities is that the domestic interchangeable or substitutable goods. In
authorities having jurisdiction over the acts a free market, business should be a
competitive process with consumers as the
of firms outside the jurisdiction or
beneficiaries. But, sometimes the firms
domestic firms acting from outside but either by some agreements or by their
having appreciable adverse effects on dominant position or by mergers, abuse
competition inside the country. The anti- their position for maximum profits to the
trust authorities, in many countries, do not detriment of the consumers. Hence the
have this power through the statute and Competition laws came to existence.
thus acquired by itself or by the courts Competition law is designed to protect
businesses and consumers from anti-
decisions due to ‘effect doctrine’. If there
competitive behaviour of producers.
is any ‘effect’ of the actions of the firm The Competition Authorities all
within a specific territory which eliminates over the world follows the philosophy of
the competition, regulators can take modern competition laws and aims at
appropriate action even though the firm encouraging competition and at protecting
acted outside the country. A comparative markets against anti-competitive practices
study of extra-territorial power across by enterprises. The Competition
Commission of India has been established
jurisdiction has been made in this paper.
to prevent practices having adverse effect
Key words: Effect doctrine, competition on competition, to promote and sustain
competition in markets, to protect the
authorities, anti-competitive business interests of consumers and to ensure
practices. freedom of trade carried on by other
participants in markets in India, and for
Introduction: matters connected therewith or incidental
thereto.2 The competition laws and
Competition is the process of
authorities across the globe primarily
rivalry among the producers or where they
prohibit three activities namely- anti-
strive against each other to enhance profit
competitive agreements, abuse of
and to attract more customers or to get the
dominant position by enterprises, and
1 regulate combinations, consisting of
The author is Teaching Associate at Department
of Law, Ch. Devi Lal University, Sirsa, Haryana mergers, amalgamations and acquisitions
and also, pursuingPh. D. on competition law
2
fromDepartment of Law, K.U.K. Preamble to the Competition Act, 2002.

205
 IRACST – International Journal of Commerce, Business and Management (IJCBM), ISSN: 2319–2828
Vol. 3, No. 1, February 2014

with a view to ensure that there is no greater flows of exports, imports and
adverse effect on competition and markets. foreign direct investment (FDI).
In the era of globalisation and
liberalisation, the effects of economic Multinational enterprises have
actions are not restricted by the political or emerged as the key agents of international
economic co-ordination. They provide the
geographical limits. There may be
capability to generate innovations and
possibility that any firm having any deliver new goods and services to the
agreement beyond the limits of one market.4In this era of globalisation, the
country, adversely affect the business World Trade Organisation (WTO)
environment of that country due to the agreements and the easy accessto global
anti-competitive effects of the agreement/ markets, the effects of economic actions
combination. are not restricted to a specific political or
geographical territorial limit. The results of
In this paper, I will analyse the the actions of transnational or
‘effects doctrine’ and the extra territorial multinational companies will spread far
and wide depending on the strength of the
jurisdiction of the competition
company. With the opening of markets,
commissions with case laws and the and increasing inflow of goods and
comparative study of the US and EU laws. international players entering the
developing markets, cross border issues
Global Markets and Effects of Firm’s are bound to arise.
Conduct throughout the World:
Controlling the commercial
International economic integration behaviour of entities beyond one’s own
is not a new phenomenon. Tradetook place border is clearly a difficult task. It has
between distant civilizations even in been observed by Karel van Miert, former
ancient times and since the travels of EU Competition Commissioner, that
Marco Polo, global economic national or even regional authorities are ill
integration—through trade, factor equipped to grapple with the problem
movements, and communication of posed by the commercial behaviour
economically useful knowledge and occurring beyond their borders.5 The
technology—has been on a generally competition issues that arise due to the
rising trend. This process of globalization increased cross border trade include-
in the economic domain has not always market power in the global or export
proceeded smoothly; nor has it always market, barriers to import competition,
benefited all whom it has affected. The issues relating toforeign investment and
intensification of competition at both intellectual property rights related issues.6
domestic and international levels has In the economic liberalised and globalised
driven firms to look beyond their domestic environment, the companies are having
markets for new opportunities.3 The business in various [Link] a firm has
progressive removal of barriers to trade adopted some anti-competitive behaviour,
and capital movements has stimulated
4
Ibid at p. 120.
5
Alison Jones and Brenda Sufrin, EC Competition
Law, London: Oxford University Press, 2001, p.
3
NikiGeiersbach, The Impact of International 1040.
6
Business on the Global Economy;Business CUTS Institute of Regulation & Competition
Intelligence Journal - July, 2010 Vol.3 No.2, p. (CIRC), Emerging Issues in Competition Law
124. (Module 8 Unpublished study notes for D-CPL).

206
 IRACST – International Journal of Commerce, Business and Management (IJCBM), ISSN: 2319–2828
Vol. 3, No. 1, February 2014

and the firm is having business all over the of the competition law, where the states
world, as a result, the effect of that very help each other to apply its jurisdiction and
anti-competitive activity spills all over the to take action against the firm which
world. If the firms have an illicit infringes the monopolies and restrictive
arrangement as cartel, the whole world laws of the affected state.10The effect
will have adverse effect of the cartel as doctrine is a doctrine that gives regulating
either the prices will be hiked or the authorities extra territorial jurisdiction to
markets will be divided hence competition act, investigate, collect evidences,
will be eliminated andultimately apprehend, restrain and penalise acts
consumers will be harmed. which have taken place beyond the
political borders, but have an effect on the
Effect Doctrine: markets of the regulating nations.

Effects doctrine means, domestic Evolution of the doctrine:

competition laws are applicable to foreign
firms - but also to domestic firms located The US:
outside the state’s territory, when their
behaviour or transactions regarding supply In the US commercial law
of goods and provisions of services, jurisprudence, the effect doctrine has been
produce an "effect" within the domestic developed through the US court’s
territory. The effect of these firms acting interpretation of the antitrust law to
from outside the territory must have such restrain, prohibit and penalise the activities
appreciable and substantial harm not only outside the territory having adverse effect
to the competitors but also the consumers on business within the US territory. In
within the [Link] "nationality" of 1909, American Banana Case,11 where all
firms is irrelevant for the purposes of the acts complained of were committed
antitrust enforcement.7The effects doctrine outside the territory of theUnited States,
covers all firms irrespective of their including the defendant’s alleged
nationality- even domestic company acting inducements of the Costa
outside the jurisdiction.8 Ricangovernment to monopolize the
banana trade, the US Supreme Court,
The effects doctrine is justified categorically deniedjurisdiction over the
under public international law when it is issue on the basis of the traditional
foreseeable that a proposed activity or territorial principle.12
concentration will have an immediate and However, inthe American Tobacco
substantial adverse effect in the case,13 the US Supreme Court held that,
Community.9 The principle of comity also the public policy manifested by the Anti-
applies to the extra territorial application Trust Act is expressed in such general

7 10
Glossary of Competition Term, available at: Pitofsky, “Competition in a Global economy”
[Link] Journal of international EconomicLlaw 403 on 407
concurrence/Glossaire-des-termes-de/Effects- (1991).
11
doctrine_(Visited on October 25, 2013). American Banana Co. v. United Fruit Co., 213
8
Ryan Paul Knott, Extraterritoriality, the Effect U.S. 347 (1909).
12
Doctrine and Enforcement Cooperation through GautamShahi, Effects Doctrine: Evolution and
Bilateral Agreements with regard to Antitrust Law Execution (2007) (Unpublished project report
(2010) (Unpublished LL.M dissertation, University under internship programme, Competition
of Johannesburg). Commission of India).
9 13
Brownlie, Principles of Public International Law US v. American Tobacco Co., 221 U.S. 106
303 (4thedn.). (1911).

207
 IRACST – International Journal of Commerce, Business and Management (IJCBM), ISSN: 2319–2828
Vol. 3, No. 1, February 2014

language that it embraces every within the United States; and it follows
conceivable act which can possibly come from what we have just said that both were
within the spirit of its prohibitions, and unlawful, though made abroad, if they
that policy cannot be frustrated by resort to were intended to affect imports and did
disguise or subterfuge of any kind.... this affect them”.Since the Alcoa case, U.S.
case discloses a combination with the courts continued to follow the new
purpose of acquiring dominion and control jurisdictional formula of the effects
of interstate commerce in tobacco by doctrine.
methods and manners clearly within the
prohibition of the Anti-Trust [Link] in Tests for the application of effects
the Sisal case,14 the territorial principle doctrine:
wasapplied more flexibly and the US
Supreme Court exercised jurisdiction over In the Timberlane case16,the court laid
thedefendants on the ground that although down certain tests which have to be
the agreements in question were concluded applied before asserting legitimate claim to
byforeigners outside the United States,
extraterritorial jurisdiction over alleged
jurisdiction was limited to what was
performed andintended to be performed anticompetitive [Link] court ruled
within the territory of the United States. in affirmative that the U.S. has a legitimate
Inthe Alcoa case,15 the United claim to jurisdiction, but there are some
States took action against the Aluminium situations where they shouldn’t
Company of America and others for exercise that jurisdiction. Court uses a 3-part test
adjudication thatthe named defendant was to decide if this is an antitrust issue that the U.S.
monopolizing interstate and foreign
needs to get involved with:
commerce, and that it should be dissolved,
and toadjudge that such defendant and
• There must be some effect - actual or
defendant Aluminium Limited had entered
into a conspiracy in restraint of intended (direct or substantial) - on
suchcommerce and for other relief under American commerce before the federal
the Sherman Anti-Trust Act, Sec. 4, 15 courts may legitimately exercise subject
U.S.C.A. matter jurisdiction.
It was held that “any state may
impose liabilities, even upon persons not 16
Timberlane Lumber Co. v. Bank of America
within its allegiance, for conduct outside National Trust & Savings Association. 749 F.2d
its borders that has consequences within 1378. Also different standards have been urged by
its borders which the state reprehends; other commentators. Julian von Kalinowski,
advocates a "direct or substantial" effect test—
and these liabilities other states will "any effect that is not both insubstantial and
ordinarily recognize, but for argument we indirect" should support jurisdiction, a view that
shall assume that the Act does not cover was adopted by the district court in Occidental
agreements, even though intended to affect Petroleum v. Buttes Gas & Oil Co.,331 [Link]. 92,
imports or exports, unless its performance 102-03 ([Link].1971), affirmed on other
grounds, 461 F.2d 1261 (9th Cir.), cert. denied, 409
is shown actually to have had some effect U.S. 950, 93 [Link]. 272, 34 [Link].2d 221 (1972).
upon them. Both agreements would clearly James Rahl turns away from a flat requirement of
have been unlawful, had they been made effects by concluding that the Sherman Act should
reach a restraint either "(1) if it occurs in the course
of foreign commerce, or (2) if it substantially
14
US. v. Sisal Sales Corporation, 274 U.S. 268 affects either foreign or interstate commerce."
(1927). James Rahl, Foreign Commerce Jurisdiction of the
15
US v. Aluminium Company of America et al, American Antitrust Laws, 43 Antitrust L.J. 521,
148 F. 2d. 416 (1945). 523 (1974).

208
 IRACST – International Journal of Commerce, Business and Management (IJCBM), ISSN: 2319–2828
Vol. 3, No. 1, February 2014

• A greater showing of burden or restraint • The relative importance to the violations

may be necessary to demonstrate that charged ofconduct with the U.S. as
the effect is sufficiently large to present a compared with conduct abroad.17
cognizable injury to the US, and
therefore, a civil violation of the antitrust The EU:
laws. The doctrine has been adopted by
the European Commission even though the
• (as a matter of international comity and Treaty of Rome or the competition law of
fairness) Whether the interests of, and European Commission is silent on the
links to, the U.S. -including the extra territorial [Link] on the
magnitude of the effect on American principles of nationality and territoriality,
foreign commerce – are sufficiently the extraterritorial application of Articles
strong, vis-a-vis those other nations, to 81 and 82 of EC is therefore ensured
through the use of three legal constructs,
justify an assertion of extraterritorial
namely the “economic entity” doctrine, the
authority. “implementation” doctrine and the “effects
doctrine”. The former two doctrines are
Also the court provided the balancing tests - established doctrines of EC law, as
Elements to be weighed: Looking at the totality recognized by the European Court of
of the circumstances; Justice (“ECJ”).
In the absence of formal
• Degree of conflict with foreign law or recognition by the ECJ, however, it
policy. remains unresolved whether the “effects
doctrine” enjoys the same status.18 In the
• The nationality or allegiance of the vast majority of cases, however, the fact
parties and thelocations or principal that the “effects doctrine” has not been
places of business of corporation. formally recognized by the ECJ, will have
no bearing on the ability to assert subject-
• The extent to which enforcement by matter jurisdiction over non-EU
either state can beexpected to achieve undertakings located outside the EU.19The
compliance. 17
Restatement (Second) of Foreign Relations Law
of the United States,s. 40 states that a court should
• The relative significance of effects on act in the light of such factors as:
the U.S. ascompared with that (a) vital national interests of each of the states,
elsewhere. (b) the extent and the nature of the hardship that
inconsistent enforcement actions would impose
upon the person,
• The extent to which there is explicit (c) the extent to which the required conduct is to
purpose to harm or affect American take place in the territory of the other state,
commerce. (d) the nationality of the person, and
(e) the extent to which enforcement by action of
either state can reasonably be expected to achieve
• The foreseeability of such effects, and; compliance with the rule prescribed by that state.
18
R. Whish, Competition Law, Lexis Nexis, 5th Ed.,
2003, p. 437. Also, Damien Geradin, Marc Reysen,
et. al., Social Science Research Network available
at: [Link]
19
Subject-matter jurisdiction is the right which
States or institutions possess to make their laws
applicable to the activities, relations or status of

209
 IRACST – International Journal of Commerce, Business and Management (IJCBM), ISSN: 2319–2828
Vol. 3, No. 1, February 2014

doctrine extends subject-matter the cases having extraterritorial issues. In

jurisdiction to all situations where the the Wood Pulp Case22, in which a number
economic effects in the EU of anti- of Finnish, American and Canadian wood
competitive actions taken abroad are pulp producers outside the EC jurisdiction
immediate, reasonably foreseeable and formed a price cartel and EC members
substantial.20 charged with inflated prices. The
In the sixth report on Competition jurisdiction over these producers was
Policy in 1977 the Commission restated its justified on the ground that they were
view, concluding that“in terms of exporting and selling directly to the
legislation, administrative practice and costumers in the EC through branches,
court rulings, the legal theory here—the subsidiaries or agents at a price not less
'effects' theory—is based on a broad than two-thirds of the total shipment,
interpretation of the principle that the leading to 60% of the consumption of
authorities can act against restrictions of wood pulp in the EC being affected. The
competition whose effects are feltwithin Commission held that the relevant pulp
the territory under their jurisdiction, even producers and trade associations had
if companies involved are locating infringed Article 81 (1) EC all of which
anddoing business outside the territory, had their registered offices outside the
and of foreign nationality, have no link Community with only few having some
with thatterritory, and are acting under an kind of representation, such as a
agreement governed by foreign law.”21 subsidiary, within the EC. The
The Commission and Commission explicitly made reference to
Europeancourts have evolved and acquired the effect of the agreements and practices
this jurisdiction by its own while deciding on prices announced and/or charged to
customers and on resale of pulp within the
EC in order to assert jurisdiction.
persons, and to the interests of persons in property.
Such jurisdiction is exercised by the enactment of On appeal, Advocate-General
legislation, such as Articles 81 and 82 EC, or by the Darmon espoused the effects doctrine
laying down of rules by administrative agencies or reflecting a belief among several
by courts. Butterworths Competition Law (Loose Advocate-Generals that the doctrine
Leaf), Volume 3, Issue 71, para. XII/2. should become an established concept of
20
Gencor v. Commission, [1999] E.C.R. II-753,
para. 90. EC [Link] particular, he opined that “there
21
Competition Policy, Sixth Report on Policy is no rule of international law which is
Towards Enterprises- Main Developments in capable of being relied upon against the
Community Policy,Published in conjunction with criterion of the direct, substantial and
the 'Tenth General Report on the Activities of the foreseeable effect”.23
European Communities', Brussels, Luxembourg
(April 1977). This theory is also recognized by the Again the doctrine was discussed and
laws of several Member States. The German Act affirmed in the Gencor case24concerning a
against Restraints of Competition of 1957, for
instance, states at Section 98(2): 'This act shall
22
apply to all restraints of competition which have Wood pulp, (1985) O.J. L 85/1, (Commission
effect in the area in which this act applies, even if decision of 19 December 1984). In appeal to the
they originate outside such area'.Also, in ECJ, Ahlstrom v. Commission, European Court
Competition Policy, 2nd Report, point 24, the Judgment of 27 September 1988, European Court
Commission stated that it and the Court of Justice Reports 1988, 5193.
23
both considered that the Community had power to Opinion of the Advocate-General Darmon of 25
act against a non-Community undertaking under May 1988 in joined cases 89, 104, 114, 116, 117
Article 85 wherever the effects of the restrictive and 125-129/85 [1988] E.C.R. 5214 para.57.
24
practice were felt within the common market.E. Judgment of the Court of First Instance, Case T-
Nerep, Extraterritorial Control of Competition 102/96, Gencor v. Commission, [1999] E.C.R. II-
under International Law 1983. 753.

210
 IRACST – International Journal of Commerce, Business and Management (IJCBM), ISSN: 2319–2828
Vol. 3, No. 1, February 2014

merger of two South Africancompanies, in 2002(actual implementation after the

which the territorial scope of the E.E.C. amendment Act of 2007) the Monopoly
Merger Regulation (RegulationNo. and Restrictive Trade Practices
4064/89) and its justification under Commission under the Monopoly and
international law was reviewed. The Court Restrictive Trade Practices Act,
ofFirst Instance of the European 1969(hereinafter referred to as the 'MRTP
Community observed that: Act') was functioning to check monopoly
“According to Wood Pulp, the of big size firms, stop restrictive trade
criterion as to the implementation of an practices and to protect the consumers.
agreementis satisfied by mere sale within The Government of India, in April 1964,
the Community, irrespective of the appointed the Monopolies Inquiry
location of thesources of supply and the Commission under the Chairmanship of
production plant. It is not disputed that Justice K. C. Das Gupta, a judge of the
Gencor andLonrho carried out sales in the Supreme Court, to inquire into the extent
Community before the concentration and and effect of concentration of economic
would have continued to do so thereafter. power into the private hands and the
Accordingly, the Commission did not err prevalence of monopolistic and restrictive
in itsassessment of the territorial scope of trade practices in important sectors of
the Regulation by applying it in this case economic activity other than agriculture.
toa proposed concentration notified by The Monopolies Inquiry
undertakings whose registered offices Commission submitted its report to the
andmining and production operations are Government of India on October 31, 1965.
outside the Community.... application of It was observed in the report that "there
the Regulation is justified under public were dangers from concentrateeconomic
international law when itis foreseeable powers and monopolistic practices and
that a proposed concentration will have an they exist in large measure atpresent or
immediate andsubstantial effect in the potentially".It was felt that the
Community” recommendation of the said commission
The court applied the three criteria should be given effect to in order to strike
of the doctrine-immediate, substantial, and a balance between the twin object of the
foreseeableeffect held that, “the social policy, i.e., economic development
application of the Regulation to the and equity.
proposedconcentration was consistent with The Government of India agreed
public international law.” It should be with the Monopolies Inquiry Commission
noted that inGencor Case, although the that steps should be taken to ensure that
Wood Pulp case was referred to and the the concentration of the economic power
“implementation” testwas applied in in private hands did not operate to the
connection with the territorial scope of the common detriment and that a permanent
E.E.C. Merger Regulation, theeffects commission should be established by law
doctrine was applied for the justification of to control and regulate monopolistic and
jurisdiction under public restrictive trade [Link] pursuance of
internationallaw.25 the recommendations of the Monopolies
Inquiry Commission,theMonopolies and
India: Restrictive Trade Practices Commission
was established under theMonopolies and
In India, before the passing and Restrictive Trade Practices Act, 1969
implementation of the Competition Act, passed by the parliament which came into
operation from the 1stJune, 1970.
25
See supra, footnote 13 at p. 10.

211
 IRACST – International Journal of Commerce, Business and Management (IJCBM), ISSN: 2319–2828
Vol. 3, No. 1, February 2014

The objectives of the MRTP Act India. During March-April, 1998,

were to provide that the operation of the complaints were made by the said
economic system does not result in the respondent to the Customs Department,
concentration of economic power to the alleging that the Indonesian manufacturers
common detriment for the control of of float glass, in association with Indian
monopolies, for the prohibition of importers were allegedly indulging in
monopolistic and restrictive trade heavy under-invoicing. The respondents
practices. It was thought that the above were, however, informed by the Customs
legislation by promoting competition Department in Calcutta that if they had any
would prevent the traders, manufacturers genuine grievance, the same could be
or producers form indulging in restrictive made before the Designated Authority,
trade practices and consumer would get a Ministry of Commerce dealing with anti-
fair deal. dumping complaints. On 10th September,
As far as the effects doctrine is 1998, the respondent No.1 filed a
concerned,Section 14 of the Monopolies complaint before the MRTP Commission
and Restrictive Trade Practice Act, under Section 33(1) (j), (ja) and Section
1969,provided: 36A read with Section 2(o) of the
“Orders where party concerned Monopolies and Restrictive Trade
does not carry on business in India: Practices Act, 1969 against three
Where any practice substantially falls Indonesian companies alleging that they
within monopolistic, restrictive or unfair were manufacturing float glass and were
trade practice relating the production, selling the same at predatory prices in
storage, supply, distribution or control of India, and were hence resorting to
goods of any description or the provision restrictive and unfair trade practices.
of any service and any party to such It was alleged that these sale prices
practice does not carry on business in were predatory prices as they were less
India, an order may be made under this than not only the cost of production for the
act, with respect to that part ofthe practice
product in Indonesia but also the variable
which is carried on in India.”
The Effect Doctrine was cost of production of the product. The
recognised by the Supreme Court complainant gave figures indicating the
inHaridas Exports v. All India Float Glass estimated cost of float glass internationally
Manufacturers’ Association.26 Here,due to as well as the cost of production of float
the Effect Doctrine, the MRTP Act gave glass in India with a view to demonstrate
the MRTP Commission, jurisdiction to that the Indian manufacturers of float glass
pass appropriate orders qua the
would not be able to compete with the
monopolistic and restrictive trade practices
in India, even if an agreement is entered price at which the Indonesian
outside India but results in restrictive trade manufacturers were presently selling or
practices within India. In this case, intending to sell to Indian consumers. On
Respondent No.1, All India Float Glass this basis, it was contended that the sale of
Manufacturers’ Association is an float glass by the Indonesian
association of float glass manufacturers in manufacturers at the said price will
restrict, distort and prevent competition by
26
(2002) 6 SCC 600. Also, M/s American Natural pricing out Indian producers from the
Soda Ash Corporation v. M/s Alkali Manufacturers market. This would result in lowering the
Association of India ( as ANSAC v. AMAI case,
Civil Appeal No. 3562 of 2000 decided with production of the Indian industry and the
Haridas Exports v. AIFGMA).

212
 IRACST – International Journal of Commerce, Business and Management (IJCBM), ISSN: 2319–2828
Vol. 3, No. 1, February 2014

consequent idle capacity and losses would India, is carrying on business in a foreign
force the industry to become sick which country, the commission can take
would lead to its closure which would cognizance of the restrictive trade practice
have a direct impact on the employment in because the said trade practice is being
the industry. carried out in India.

The court held that, The MRTP Post 1991, policy of liberalisation,
Commission can, inter alia, take action privatisation and globalisation was
whenever a Restrictive Trade Practice is introduced. The MRTP Act was found
inadequate to meet the challenges of a
carried out in India in respect of imported
modern globalised economy. Government
goods or [Link] is only in respect of of India (GOI) had appointed a
the Indian leg of the restrictive trade committeeunder the Chairmanship of Shri
practice, can an order under Section 12 A S.V.S. Raghavan in October, 1999 to
and/or Section 37 be [Link] Section examine The Monopolies and Restrictive
33 of the Act what can be registered is Trade Practices Act, 1969 for shifting the
only an agreement in regard to which any focus of the law from curbing monopolies
to promoting competition and to suggest a
party to an agreement carries on business
modern competition law in consonance
in India [Section 35 Explanation I]. But with international developments.
this does not mean that if an agreement is Competition Bill, 2001 was introduced in
entered into outside India and which the Lok Sabha on 6 August, 2001 and was
results in a Restrictive Trade Practice in referred to Parliamentary Standing
India, the MRTP Commission has no Committee for its recommendation. It was
jurisdiction. The "effects doctrine" will passed in 2002 and received the assent of
the President in 2003 and subsequently
apply and Section 2(o) read with Section
amended by the Competition
2(u) and Section 37 gives jurisdiction to (Amendment) Act, 2007. The preamble’s
the MRTP Commission to pass appropriate stated objectives is to establish the
orders qua the Restrictive Trade Practice in commission which has the duty to
India. The MRTP Commission, in such a eliminate practices having adverse effect
case, may not be able to stop import but on competition, promote and sustain
competition, protect consumers interest,
there can be order imposing post import
ensure freedom of trade carried on by
restrictions such as, for example, not to other participants in markets, in India.
sell imported goods in India in such a
manner which will be regarded as a Effect Doctrine &the Competition
restrictive trade practice under Section 37. Commission of India under Competition
Act, 2002:
Also, the MRTP Commission held
in Director-General (investigation & The new competition law in India,
Registration) v. Voltas Ltd.,27that in view the Competition Act, 2002 includes the
of section 14 of the Act notwithstanding extra-territorial jurisdiction clause. Section
32 of the CA ’02 provides the extra-
that the business concern, which entered
territorial power to have jurisdiction in
into agreement with the respondent in cases where the actions outside India have
adverse effect on the competition and
27
(1994) 79 Comp. Cases 274 (MRTPC).

213
 IRACST – International Journal of Commerce, Business and Management (IJCBM), ISSN: 2319–2828
Vol. 3, No. 1, February 2014

markets in India. The provision is as It has also been provided that the
under: investigation and inquiry in such matters
may be proceeded as per the provisions
28
Acts taking place outside India but applicable to the firms acting in India. The
having an effect on competition in India. provision specifically provides that any
32. The Commission shall, enterprise or party or any combination
notwithstanding that,— (acquisition, amalgamation or merger) of
(a) an agreement referred to in section 3 firms, by their actions beyond the Act’s
has been entered into outside India; or (b) territorial jurisdiction, if having
any party to such agreement is outside appreciable adverse effect on the
India; or businesses and markets in India, the
(c) any enterprise abusing the dominant commission can initiate process, take
position is outside India; or action and regulate the matters connected
(d) a combination has taken place outside and incidental to the competition in
India; or markets. India may face difficulty in the
(e) any party to combination is outside execution of the extra territorial
India; or jurisdiction as these cartels are very strong,
(f) any other matter or practice or action still the provisions of the Act enables the
arising out of such agreement or dominant Commission to act to and penalise so that
position or combination is outside India, the competition in the economy can be
have power to inquire in accordance with sustained. Also, for the execution the
the provisions contained in sections 19, government should work to give effect to
20, 26, 29 and 30 of the Act into such the bilateral ties, so that the firms
agreement or abuse of dominant position adversely affecting the economy may be
or combination if such agreement or restrained.
dominant position or combination has, or
is likely to have, an appreciable adverse Conclusion:
effect on competition in the relevant
market in India and pass such orders as it The provisionsrelating to anti-
may deem fit in accordance with the competitive agreements and abuse of
provisions of this Act. dominant position are for protection of
Section 32 gives unambiguous consumer interest and enhancing
provision where power has been given to competition in the market place. Similarly,
the Competition Commission to take the provisions relating to Combinations are
action where any anti-competitive to ensure that a Combination does not
practices i.e. any agreement under section create an appreciable adverse effect on
3, abuse of dominance and combinations competition and it does not result in the
outside India, but have adverse effect in monopoly of a particular concern or firm.
India. The Competition Commission of It would be a necessity to understand
India have the jurisdiction to try and applicability and implications of these
penalise the business arrangements acted provisions to one’s business as the cost of
outside India but having adverse effect on non-compliance could be too steep and
competition in India in matters connected detrimental.
with anti-competitive agreements, abuse of At present ‘effects doctrine’ in
dominance and combinations outside India India is at an initial stage. Section 32 of the
but having effects in India. Competition Act, 2002 gives the
Competition Commission of India, the
power to inquire into any anti-competitive
28
Section 32, the Competition Act, 2002. practice having effect in India, even if the

214
 IRACST – International Journal of Commerce, Business and Management (IJCBM), ISSN: 2319–2828
Vol. 3, No. 1, February 2014

same has taken place outside the territory

of India. But, execution outside India is
very difficult. Even, the lengthy court
process, time taken in deciding the appeals
by the appellate courts is something which
denies the justice to the affected. The
companies of the countries with whom we
do not have warm relations or which are
hostile to us are next to impossible to bind
by the orders of the commission. India, if
want to reap the fruits of this new law,
then the bilateral relations with foreign
countries must be very strong so that these
foreign companies acting from outside can
be stopped to act in such manner and to
execute the orders of the commission for
the adverse effect on our economy.

215