MRTP Act

The Monopolies and Restrictive Trade Practices Act, 1969, 1969, brought into force from 1st June 1970, was 1970, a very common controversial piece of legislation. legislation. The principal objectives of the MRTP Act, which extends to the whole of India except to the State of Jammu and Kashmir, were: were: 1. Prevention of concentration of economic power to the common detriment, and 2. Control of monopolistic, restrictive and unfair trade practices which are prejudicial to public interest. interest.

The MRTP Act was significantly amended in 1982, 1982, 1984, 1984, 1985 and 1991. 1991. The amendment of 1985 was to raise the asset threshold of undertaking (s) from Rs. 20 Crores to Rs. Rs. Rs. 100 Crores for applying the provisions of the MRTP Act relating to prevention of concentration of economic power. power.

Recent Changes
The Industrial Policy Statement of July 24, 1991, 24, 1991, announced very drastic changes in the MRTP Act, viz: viz: 1. Repeal of the provisions of Act pertaining to concentrating of economic power, except the provisions empowering the government to defuse concentration of economic power to the common detriment. detriment. 2. The provisions of the MRTP Act pertaining to the concentration of economic power were much criticized because of their negative impact on growth and competition. competition.

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The MRTP Act sought to prevent the concentration of economic power to the common detriment by preventing those developments which might result in the concentration of economic power such as substantial expansion of existing undertaking; undertaking; mergers and amalgamations; takeovers; amalgamations; takeovers; and interconnection of undertakings. undertakings. The MRTP companies (i.e. dominant undertaking (i. with assets of Rs one crore or more and other undertakings having assets, including that of interconnected undertakings, of Rs. 100 crores or Rs. more) had to obtain prior approval of the central government for any of the developments. developments.

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The interference of the government through the MRTP Act in investment decisions of large companies became deleterious in its effects on Indian industrial growth. The thrust of the MRTP growth. Act in future will be on the control of restrictive and unfair trade practices. practices. The Government, however retains the power to defuse or breakup concentration of economic power to the common detriment. If the central detriment. government is of the opinion that the working of an undertaking is prejudicial to the public interest, or has led or is leading, or is likely to lead, to the adoption of any monopolistic or restrictive trade practice, the government is empowered by the

MRTP act to direct: direct: 1. The division of any trade of the undertaking by the sale of any part of the undertaking or assets thereof: or thereof: 2. The division of any undertaking or interconnected undertakings into such number of undertakings as the circumstances of the case may justify. justify.

MRTP Commission
In accordance with the provisions of the Act, the Government of India has set up a Commission known as the Monopolies and Restrictive Trade Commission. The Act Commission. provides that the Commission shall consists of a chairman, and not less than two and not more than eight other members, to be appointed by the Central Government. The Government. chairman shall be a person who has the qualification to be a judge of a Supreme Court or of a High Court, and the members thereof shall be persons of ability, integrity and standing, who have adequate knowledge or

experience of, or have shown capacity in dealing with problems relating to economics, law, commerce, accountancy, industry, public affairs or administration. administration. The Act empowers the Central Government to appoint a Director General of Investigation and Registration, and as many Additional, Joint, Deputy or Assistant Directors-General of DirectorsInvestigation and Registration, as it may think fit, to conduct investigations for the purposes of this Act, and for maintaining a register of agreements subject to registration under this Act, and for performing such other functions as are, or may be, provided by, or under this Act. Act.

The Director General may authorize any one of the Additional, Joint, Deputy or Assistant DirectorsDirectorsGeneral to function as the Registrar of Agreements subject to registration under this Act. Act.

Jurisdiction and Powers of the Commission

The MRTP Commission is vested with powers to inquire into restrictive, monopolistic and unfair trade practices. practices. The commission may inquire into any restrictive trade practice either on the application of the Director General of Investigation or upon a reference made to it by the Central or a State Government, or on receiving complaint from any trade or consumer association having a membership of not less than 25 persons or 25 or more consumers, or upon its own knowledge or information. information.

For the purpose of an inquiry under this Act, the commission has the same powers as are vested in a Civil Court under the Civil Procedure Code, 1908, 1908, in respect of; of; 1. Summoning a witness and his examination on oath; oath; 2. Discovery and production of evidence; evidence; 3. Reception of evidence on affidavits; affidavits; 4. Requisitioning public records from a court or an office; office; and 5. Issuing a commission for the examination of a witness. witness.

The proceedings before the Commission are judicial proceedings and the Commission is deemed to be a Civil Court.

Control of Monopolistic Trade Practice

A monopolistic trade practice is a trade practice which has, or is likely to have, the effect of reasonably preventing or lessening competition in the production, supply or distribution of any goods or services; services; limiting technical development and capital investment to the common detriment; or detriment; allowing the quality of goods or services to deteriorate. deteriorate.

A monopolistic trade practice shall be deemed to be prejudicial to the public interest, if having regard to the economic conditions prevailing in the country, and to all other matters which are relevant in the particular circumstances, the effect of the trade practice is or would be: be: 1. To increase unreasonably the cost relating to the production, supply or distribution of goods or the performance of any service; service; 2. To increase unreasonably: unreasonably:
a) The price at which goods are sold, or b) The profits derived from the production, supply pr distribution of any goods (including their sale or purchase) or from the performance of any service: service:

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To reduce or limit unreasonably competition in the production, supply or distribution of any goods (including their sale or purchase) or the provision of any service To limit or prevent unreasonably the supply of goods to consumers or the provision of any service To result in a deterioration in the quality of any goods or in the performance of any service. service.

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Section 31 provides that where it appears to the Central Government that the owners of one or more monopolistic undertakings are indulging in any monopolistic trade practice, or that monopolistic trade practices prevail in respect of any goods or services, the government may refer the matter to the MRTP Commission for an inquiry and the commission shall, after such hearing as it thinks fit, report to the Central Government its findings thereon. thereon.

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The Commission may make such an inquiry also on its own motion. If such an inquiry finds that motion. any monopolistic trade practice operates or is likely to operate against the public interest, the Central Government may pass such an inquiry also on its own motion. If such an inquiry finds motion. that any monopolistic trade practice operates or is likely to operate against the public interest, the Central Government may pass such an orders as it may think fit to remedy or prevent any mischiefs which result or may result from such trade practice. practice.

3. Any order made by the Central Government in this regard may include an order: order:
1. Regulating the production, storage, supply, distribution or control of any goods by the undertaking or the control or supply of any service by it and fixing the terms of sale (including prices) or supply thereof 2. Prohibiting the undertaking from resorting to any act or practice or from pursuing any commercial policy, which prevents or lessens, or is likely to prevent or lessen, competition in the production, supply or distribution of any goods used or produced by the undertaking; undertaking; 3. Fixing standards for the goods used or produced by the undertaking. undertaking.

4. Declaring unlawful, except to such extent and in such circumstances as may be provided by or under the order, the making or carrying out of any such agreement as may be specified or described in the order. order. 5. Requiring any party to any such agreement as may be so specified or described to terminate the agreement within such time as may be so specified, either wholly or to such an extent as may be so specified. specified.

Control of Restrictive Trade Practice

A restrictive trade practice is a trade practice which has the effect, actual or probable of restricting, lessening or destroying competition. Such trade competition. practices may tend to obstruct the flow of production or to bring about manipulation of prices or conditions of delivery etc. to the etc. common detriment. detriment. The distinction between the two is based, perhaps, on the Monopolies Inquiry Commission, which confined the word restrictive trade practices to mean restrictive trade practices other than those pursued by monopolist. monopolist.

The words restrictive trade practice to mean practices other than those pursued by monopolies which obstruct the free play of competitive forces or impede the free flow of capital resources in to the stream of production or of finished goods in the stream of distribution or of any point before they reach the hands of the ultimate consumer. consumer.

Possible Restrictive Trade Practices

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Concert or Collusion/Cartels Price Discrimination Predatory Pricing TieTie-up sales FullFull-line Forcing Exclusive Dealing Area Restriction Resale Price Maintenance

Competition Act 2002

 The

Ministry of Corporate Affairs, Government of India has issued a has issued a Notification dated 28th August 2009, 2009, whereby the most controversial the Monopolies and Restrictive Trade Practices Act, 1969 ( the MRTP Act ) stands repealed and is replaced by the Competition Act, 2002, 2002, with effect from September1,2009. September1 2009.

Transitional Provisions
 MRTP Commission
a) It will continue to exercise jurisdiction and power under the repealed MRTP Act in respect of any case or proceeding filed before 1 September 2009, for a period of two years. It will not, however entertain any new case arising under the MRTP Act on or after 1 September 2009. b) Upon the expiry of the specified two year period, the MRTP Commission shall stand dissolved.

Transfer of pending cases

Upon the expiry of two years from 1 September 2009, cases pending before the MRTP Commission will be transferred as follows:follows:a) Monopolistic or restrictive trade practice cases: All cases: pending cases pertaining to monopolistic or restrictive trade practices, including cases having an element of unfair trade practice, shall stand transferred to the Competition Appellate Tribunal, which shall adjudicate such cases in accordance with the provisions of the repealed MRTP Act.

b) Unfair trade practice cases: cases: All pending cases relating solely to unfair trade practices shall stand transferred to the National Commission as constituted under the Consumer Protection Act, 1986, which may in turn transfer such cases to a State Commission constituted under the said Act under circumstances it deems appropriate. These cases will be dealt with by them in accordance with the provisions of the Consumer Protection Act.

Cases relating to giving false or misleading facts disparaging the goods, services or trade of another person under the MRTP Act:

All such pending cases shall be transferred to the Competition Appellate Tribunal which will be dealt in accordance with the provisions of repealed MRTP Act.

 Investigations/proceedings undertaken by

the Director General under the MRTP Act

With effect from 1 September 2009, all pending investigations and proceedings by the Director General relating to:to:a) Monopolistic/ restrictive trade practices will be transferred to the Competition Commission of India (CCI), who may conduct such investigations/ proceedings in any manner it deems appropriate.

b) Unfair trade practices will be transferred to the National Commission under the Consumer Protection) Act 1986. c) Cases giving false or misleading facts disparaging the goods, services or trade of another person will be transferred to the CCI.

Can Competition Act Replace MRTP ACT

MRTP Act, 1969 Based on the pre-reforms scenario Based on size as a factor Competition offences implicit or not defined Competition Act, 2002 Based on the post-reforms scenario Based on structure as a factor Competition offences explicit and defined

Complex in arrangement and language Simple in arrangement and language and easily comprehensible 14 per se offences negating the principles of natural justice Frowns upon dominance 4 per se offences and all the rest subjected to rule of reason Frowns upon abuse of dominance

MRTP Act, 1969 Registration of agreements compulsory No combinations regulation

Competition Act, 2002 No requirements of registration of agreements compulsory Combinations regulated beyond a threshold limit Competition Commission selected by a Collegium (search committee) Relatively more autonomy for the Competition Commission Competition Commission has competition advocacy role

Competition Commission appointed by the Government Very little administrative and financial autonomy for the Competition Commission No competition advocacy role for the Competition Commission

MRTP Act, 1969 No penalties for offences Reactive and rigid Unfair trade practices covered Does not vest MRTP Commission to inquire into cartels of foreign origin in a direct manner. Concept of Group Act had wider import and was unworkable

Competition Act, 2002 Penalties for offences Proactive and fliexible Unfair trade practices omitted (consumer for will deal with them) Competition Law seeks to regulate them. Concept has been simplified