MRTP

Ranjit SJ

Monopolies and Restrictive Trade

Practices Act

(MRTP ACT) 1969

 MRTP Act 1969 came into force from 01st June 1970 and has been amended in 1974,1980,1982,1984, and 1991. It extends to the whole of India except the State of Jammu and Kashmir.

MRTP ACT 1969

In the pre-1991 period the declared policy of the government was to curb and restrict the growth of monopoly power in the country. For this purpose, the government imposed restrictions on the entry of large business houses in a number of industries, set up a large number of industries in the public sector, and undertook various measures to encourage small and medium industries.

Contd..
The most important in this phase was passing of the MRTP Act (Monopolies and Restrictive Trade Practices Act) in 1969 and the setting up of the MRTP Commission in 1970. Since 1991, the focus has shifted from controlling monopolies to promoting competition.

APPLICATION OF THE ACT

This Act shall not apply to: Any undertaking owned or controlled by the Government Company Any undertaking owned or controlled by a corporation Any undertaking owned by a co-operative society formed and registered under any Central, Provincial or State Act Any financial institution

Objectives
Initially there were 3 objectives : To control monopolies and monopolistic trade practices Prevention of concentration of economic power in the few hands only To regulate trade practices After the amendment of the act in 1984 a 4th objective was introduced :Regulation of Unfair Trade Practices

IN Short
1. Prevention of concentration of economic power to the common detriment, control of monopolies, and 2. Prohibition of monopolistic and restrictive and unfair trade practices.

Inter-Connected & Dominant Undertakings

The MRTP Act covered two types of undertakings viz., national monopolies and product monopolies. National monopolies were covered by section 20(a) of the Act and were either single large undertakings or groups of inter-connected undertakings (i.e., large houses) which had assets of at least Rs. 100 crore (prior to 1985, this limit was 20 crore).

Contd..
Product monopolies covered under Section 20(b) and called dominant undertakings were those which controlled at least one-fourth of production or market of a product and had assets of at least Rs. 3 crore (earlier this limit was Rs. 1 crore)

Inter-connected undertakings
The definition of inter-connected undertakings was flawed and enabled many companies which were under the shadow of the same industrial house or the same corporate decision-making authority to escape from the clutches of the Act. Section 2(g) of the MRTP Act had defined inter-connected undertakings as two or more undertakings which are inter-connected with each other

 MRTP Act can be divided into 2 major parts 1. Monopolies V/s Concentration of economic power : a) the expansion, establishment of new undertakings, diversifications , Mergers and Amalgamations, of such units are subject to approval by Central Govt b) In exceptional cases the govt can force an Industrial Undertaking to divide into number of smaller divisions

Purview of the MRTP Act

A large number of agreements were specified in the MRTP Act which fell under its purview. Each one of these was required to be duly registered with the Registrar of Restrictive Trade Practices including the names of parties to the agreement. Registered undertakings were subject to the following control on their industrial activities:

Contd..
1. If it was proposed to expand substantially the activities of the undertaking by issuing fresh capital prior by installation of new machinery or in any manner, notice to the Central Government was required to be given and approval taken (Section 21)

Contd..
2.If it was proposed to establish a new undertaking the prior permission of the Central Government was required to be obtained (Section 22); and 3. If it was proposed to acquire or merge or amalgamate with another undertaking the sanction of the Central Government was required to be taken (Section 23)

Monopolistic Trade Practice

Sections 31 and 32 of the MRTP Act relate to monopolistic trade practices. monopolistic trade practice means a trade practice which has, or is likely to have, the effect of-

Contd..
1. Maintaining the price of goods or charges for the services at an unreasonable level by limiting , reducing or otherwise controlling, production, supply or distribution of goods of any description or supply of any services or in any other manner;

Contd..
2. Unreasonably preventing or lessening competition in the production, supply or distribution of any of goods produced, supplied or distributed or any services rendered in India,; 3. Limiting technical development or capital investment to the common detriment or allowing the quality or maintenance, of any services.

Contd..
4. Increasing unreasonably- (a) the cost of production of any goods; or (b) charges for the provision, or maintenance, of any services; 5. Increasing unreasonably- (a) the prices at which goods are or may be, sold or resold, or the charges at which the services are, or may be, provided; (b) the profits which are, or maybe derived by the production, supply or distribution of any goods or by the provision of any services

Contd..
6. Preventing or lessening competition in the production, supply, or distribution of any goods or in the provision or maintenance of any services by the adoption of unfair methods or unfair or deceptive practices.

MONOPOLISTIC TRADE PRACTICES

It means in order to maximize profit and to increase market power, certain business firms unreasonably charge high prices to prevent competition in the production & distribution of goods by adopting unfair trade practices. It is a trade practice which represents the abuse of the market power by charging unreasonably high prices.

Restrictive Trade Practice

According to the MRTP Act, a restrictive trade practice means a trade practice which has, or may have the effect of preventing, distorting or restricting competition in any manner and in particular:

Restrictive Trade Practices Act

The term Restrictive Trade Practice is used for any strategy used by the producers to restrict competition within a given market a) The Setting of minimum prices b) The refusal to supply retailers that stock the products of other competitors; c) Setting different prices for different buyers (discriminatory pricing)

RESTRICTIVE TRADE PRACTICE

A restrictive trade practice is a trade practice which: Prevents, distorts or restricts competition in any manner Obstructs the flow of capital or resources into the stream of production Tends to bring about manipulation of prices or conditions

Unfair Trade Practice

Unfair trade practice means a trade practice which, for the purpose of promoting the sale, use or supply of any goods or for the provision of any services, adopts one or more of the following practices and thereby causes loss or injury to the customers-

UNFAIR TRADE PRACTICE

A trade practice which, adopts unfair method for the purpose of promoting any sale. These are categorized as: False Representation False Price or Bargain Price Free gifts offer and Prize Schemes Non-compliance of Prescribed Standards Hoarding, Destruction etc.

1. FALSE REPRESENTATION
Falsely suggests that the goods are of particular standard quality, grade and composition Falsely suggest any re-built good as new one Makes a misleading representation concerning for the need for, or the usefulness of, any goods or services Gives any warrantee or guarantee to the performance and efficacy of the goods that is not based on proper tests A promise to replace until it has achieved a specified result

2. FALSE OFFER OR BARGAIN PRICE

When an advertisement is published in newspaper, offering goods at a bargain price when in fact there is no such intention that the same may be offered at the same price for reasonable period

3. FREE GIFTS OFFER AND PRIZE SCHEMES

Offering of gifts or prizes or other items with the intention of not providing them as offered or creating the impression that something is being given free of charge whereas it is fully or partly covered in the cost itself; and/or the conduct of any contest, lottery, game of chance or skill for the promoting of the product. Offering any gifts along with some other goods when the intention is different Offering some prizes to the buyers by the conduct of any contest with real intention to promote sales

4. NON-COMPLIANCE OF PRESCRIBED STANDARDS

Any sale or supply of goods, knowing or having reason to believe that the goods do not comply with the standards prescribed by some competent authority

5. HOARDING, DESTRUCTION ETC.

Any practice of that permits the hoarding or destruction of goods, with an intention to raise the cost of those or other similar goods

Contd..
By the end of March 1990, 1,854 undertakings were registered under the MRTP Act. Of these 1,787 belonged to large industrial houses and the remaining 67 were dominant undertakings. The New Industrial Policy, 1991 has now scrapped the assets limit for MRTP companies. This means doing away with the requirement of prior approval from Central Government for establishing new undertakings, expansions, mergers, amalgamations and takeovers and appointment of directors.

 The industrial policy statement of 1991 bring drastic changes in the MRTP Act. These provisions were criticized very much because of their negative impact on growth and competition .. So the following is an important point regarding the new policy: Prior approval of Central Government for establishment of new Undertakings , expansion of existing new undertakings, mergers, amalgamation, take over, and appointment of new Directors will no longer be required

Relief Available
This practice should not be repeated The agreement relating thereto shall be void Any information relating to such unfair trade practice shall be disclosed

MRTP Commission
The powers of the commission include the powers vested in the civil court and include further powers : To direct an undertaking to discontinue a trade practice and not to repeat the same To grant temporary injunction restraining an undertaking from discontinuing an alleged trade practice

 To award compensation for loss suffered or injury sustained on account of RTP, UTP,or MTP To direct the parties to issue corrective advertisements To recommend Central Government , division, Undertakings if their working is pre-judicial to public interest .

Investigation & Enquiries

The MRTP Commission can be approached with a complaint/ reference on Restrictive or Monopolistic or Unfair Trade Practices by : An individual consumer; A registered association of consumers; A trade association

Remedies Under the Act

Temporary Injunction Compensation

Competition Act, 2002

With the economic reforms program in 1991, MRTP Act lost its relevance in the new liberalized and global competitive scenario. There was a shift of focus from curbing monopolies to promoting competition. The government thus appointed Raghavan Committee examine the whole issue.

Contd..
Accordingly, the government decided to enact a law on competition. Competition bill, 2001 was introduced in Parliament and passed in December 2002. This Act is called Competition Act, 2002.

Contd..
It has been enacted to provide for the establishment of a Commission to prevent practices having adverse effect on competition, to promote and sustain competition in market, to protect the interest of consumers at large and to ensure freedom of trade carried on by other participants in markets in India, and for matters connected with or incidental thereto.