Extra-Territorial Jurisdiction: Section 32

Competition harm does not respect borders. A cartel among foreign suppliers of a raw material raises the price Indian manufacturers pay; a merger between two foreign firms may reduce the suppliers available to Indian buyers from three to two; a foreign platform may abuse a position held in India without having any establishment here. Section 32 answers all three by adopting the effects doctrine: what matters is not where the conduct occurred but whether it has or is likely to have an appreciable adverse effect on competition in a relevant market in India.

1. The Provision

Three features of the drafting should be noted. The section lists six situations, covering agreements made abroad, foreign parties, foreign dominant enterprises, foreign combinations, foreign parties to a combination, and any matter arising outside India, so no gap is left. The connecting factor is effect in India, and nothing else: presence, incorporation, an establishment or a subsidiary are unnecessary. And the Commission is directed to proceed in accordance with the ordinary procedural sections, so a foreign party is dealt with in the same way as an Indian one.

2. The Effects Doctrine

The doctrine holds that a State may apply its law to conduct abroad which produces effects within its territory. It developed in United States antitrust law and has been adopted, in varying formulations, in the European Union and elsewhere. Its justification is practical: a competition law that could reach only domestic conduct would be useless in an open economy, because the harm would simply be organised abroad.

• The Indian formulation is statutory, which distinguishes it from systems where the doctrine was developed by courts. Section 32 states the test in terms.
• The threshold is an appreciable adverse effect in a relevant market in India. A remote or incidental effect will not do, and the market affected must be an Indian one.
• The effect may be actual or likely, which matters in merger cases, where the assessment is necessarily predictive.
• Comity. The exercise of the power takes account of the fact that other authorities may be examining the same conduct, which is why cooperation arrangements and coordinated timing have become part of practice.

3. The Three Situations in Practice

1. Foreign cartels. An agreement among foreign producers fixing the price of a component or a raw material supplied to Indian industry has an effect in India whether or not any member is present here. Such cases typically come to light through the leniency programmes of other jurisdictions, and the Commission's difficulty is evidentiary rather than jurisdictional: documents, witnesses and the parties themselves are abroad.
2. Foreign abuse of dominance. An enterprise dominant in a market in India, whose conduct is decided and implemented abroad, is within Section 4 read with Section 32. The digital cases are of this kind: the relevant market is in India, the users are in India, and the conduct complained of is a global policy on licensing, ranking or data.
3. Foreign combinations. A transaction between two foreign enterprises is notifiable where the thresholds in Section 5 are met, since those thresholds include Indian assets and turnover, and after 2023 where the deal value threshold applies and the target has substantial business operations in India. Section 32 supplies the power to inquire into a combination that takes place outside India and to pass orders in respect of it.

4. The Practical Difficulties

• Service and appearance. Notices must reach parties abroad, and a party that does not appear may be proceeded against ex parte, but an order against an absent foreign enterprise is only as good as the means of enforcing it.
• Evidence. The Commission has no power to search premises abroad or to compel a foreign witness, and must rely on material held by Indian subsidiaries or customers, on documents produced voluntarily, and on cooperation with other authorities.
• Enforcement of penalty. Recovery against an enterprise with no assets in India is the central weakness, and it is why the Commission's orders frequently run against the Indian subsidiary as well as the foreign parent.
• Conflicting outcomes. The same merger may be permitted in one jurisdiction on conditions that another will not accept, and the same conduct may be lawful abroad and abusive here.

5. International Cooperation

Section 18 permits the Commission, for the purpose of discharging its duties, to enter into any memorandum or arrangement with the prior approval of the Central Government with any agency of any foreign country. Cooperation under such arrangements takes four forms.

1. Exchange of non-confidential information about market conditions, methodology and the progress of parallel investigations.
2. Waivers. In merger cases the parties commonly give the authorities written waivers of confidentiality so that they may discuss the case with each other, which is the principal mechanism by which remedies in multi-jurisdictional transactions are coordinated.
3. Coordination of timing, so that remedies are agreed and orders passed in a sequence that does not leave the parties with inconsistent obligations.
4. Technical cooperation and capacity building, including participation in the international networks of competition authorities.

6. Related Topics and Provisions