MRTP Act 1969 and Competition Act 2002

Submitted By:
Chandra Mohan Yadav
B.A. (hons.) Economics
Roll no - 19221ECO058
 Introduction to MRTP Act 1969
 The MRTP Act 1969 has its genesis in the Directive principles of state policy
embodied in the constitution of India(clauses b and c of Article 39).

 The Monopolistic and Restrictive Trade Practices Act, 1969, was enacted:
 To ensure that the economic system is not concentrated in hands of few.
 Control Monopoly.
 Prohibition of monopolistic and restrictive trade practices.

 In 1965, the Monopolies Enquiry Commission (under the Chairmanship of

K.C. Das Gupta) found that in 62 % of the total 1380 products,. In this
product group, monopoly (only one producer) was found in 425 products,
duopoly (only two producers) in 225 products, and only three producers in
160 products.
 Monopolistic Trade Practices (MTPs)

Under section 2(i) of the MRTP Act, 1969 a MTP was defined as one which
had (or was likely to have) any of the following effects:

 To limit or control, the supply or distribution of goods or services, thereby

maintaining their prices at unreasonable levels

 To limit technical development or capital investment, or allow the quality of

goods or services to deteriorate

 To unreasonably prevent or restrict competition

 To unreasonably raise the prices of goods

 Restrictive Trade Practices (RTPs)
Under the MRTP Act, a RTP was defined as one which had the effect of
preventing, distorting or restricting competition in any manner. Following acts
or agreements are deemed to be RTPs:
 To obstruct flow of capital or resources in production
 To restrict buying and selling
 Tie-in sales (e.g. requiring a customer to buy a shaving blade along with
shaving cream)
 An agreement requiring a dealer of a particular product not to deal in rival
company product
 Collective price fixation and tendering
 Minimum resale price maintenance
 Manufacturing process restricting agreements Output/supply restricting
agreements (for a product or in a particular market)
 Unfair Trade Practices (UTPs)

Unfair Trade Practices were added to the MRTP Act, in 1984. This was
done to protect consumers from wide variety of UTPs, which exploit
consumers. Some common practices deemed to be UTPs are as follows:

False or misleading representation

Bargain sale (bait) and switch selling Restriction on buying and selling

Free promotional gifts (tempt people to buy products on considerations

different from cost, quality or need)

Ignoring product safety standards

Hoarding or deliberate destruction of goods

 Regulation of MTP and RTP

MTP
 Regulation of production and sale.
 Prohibiting any action that restricts competition.
 Fixing standards of goods produced.

RTP
 The practice shall not be repeated.
 The agreement shall be void and shall stand modified in such a manner as
may be specified in the order.
 MRTP COMMISSION
In accordance with the provisions of the act, the Government of India has
set up a commission known as MRTP Commission. The act provides that the
commission shall consist of a chairman and not less than two members and not
more than eight members to be appointed by central government.

Powers of MRTP Commission

 Power of Civil Court under the Code of Civil procedure.
 To require any person to produce before it and to examine and keep any book
of account or other documents relating to the trade practice, in its custody.
 To require any person to furnish such information as respects the trade
practice as may be required or such other information as may be in his
possession in relation to the trade carried on by any other person.
 To authorize any of its officers to enter and search any undertaking or seize
any books or papers, relating to undertaking , in relation to which the inquiry
is being made.
 Remedies Under MRTP Act

Temporary injunction
Where during any inquiry the commission is satisfied that any undertaking
or any person is carrying on, or is about to carry on, any monopolistic,
restrictive or unfair trade practice, which is prejudicial to the public interest or
the interest of any trader or the class of traders generally, or of any consumer or
the class of consumers generally, the commission may grant a temporary
injunction restraining such undertaking or person from carrying on such
practice until the conclusion of inquiry or further orders.

Compensation
When any monopolistic, restrictive or unfair trade practice has caused
damage to any govt., or any trader or any consumer an application may be made
to commission asking for compensation , and the commission may award
appropriate compensation.
 Applicability of the Act
 The MRTP Act extends to the whole of India except Jammu and Kashmir.
Unless the Central Government otherwise directs, this act shall not apply to:
 Any undertaking owned or also controlled by the Government Company.
 Any undertaking owned or controlled by a corporation (not being a company
established by or under any Central, Provincial or State Act.
 Any trade union or other association of workmen or employees formed for
their own reasonable protection as such workmen or also employees.
 Undertaking owned by a co-operative society formed and also registered
under any Central, Provincial or state Act.
 Undertaking engaged in an industry, the management of which has been
taken over by any person or body of persons under powers by the Central
Government.
 Any Financial Institution
 Loopholes of MRTP Act

 Absence of specification of identifiable anti-competition practices.

 Anti competition practices like cartels, predatory pricing, rigging etc. are not
well defined.

 Poorly resourced commission.

 Inadequacy in dealing effectively with anti-competitive practices due to lack

of definitions and cumbersome procedures.
 Due to such loopholes MRTP act was amended in 1974, 1980, 1982 and
1991 to remove inconsistencies, and make it more effective and in tune with
changing economic policies from time to time.

After 1991 amendment this amendment permitted MRTP to be extended

to the public sector and government owned companies. GoI in October 1999
appointed a high level committee on competition policy and law to advise on
the competition law in consonance with the international developments.

In 2002, the MRTP Act,1969 was repealed by a new Competition Act,

2002.
 Introduction to Competition Act,2002

 The Finance Minister Arun Jaitley proposed bill of Competition Act in

parliament on 6 august 2001.

 Under the aforesaid Act, Competition Commission of India established in

October 2003.

 The main objective of the Competition Act is to maintain, promote and

protect the ‘process of competition’, in the interest of the consumer, and
attempts to eliminate practices having adverse effect on competition.
 Reasons for Competition

 According to Joseph Stiglitz, “Strong competition policy is not just a luxury

to be enjoyed by rich countries, but a real necessity for the countries striving
to create market economies.”

 Is an essential condition for national competitiveness.

 Competition promotes allocative and productive efficiencies, innovation,

and consumer welfare;

 Is integral to a market-based economy;

 Main Provisions of the Act

Under the Competition Act, 2002, the Competition Commission of India

(CCI) performs following four primary functions:

 To prohibit anti- competitive agreements

 To prohibit abuse of dominant position

 To regulate potentially anti-competitive combinations (mergers)

 To perform competition advocacy.

 Coverage of the Act

 All enterprises, whether public or private

 Government Departments, except when engaged in discharge of sovereign

functions: Currency, Atomic energy, Space and Defense specifically
indicated

 Extra-territoriality (Sec. 32)

 Provision to enter into MOUs with foreign competition authorities

 Anti- competitive Agreements

There are two types of anti-competitive agreements, namely Horizontal

and Vertical Agreements.

Horizontal Agreements
Agreements between enterprises at same stage of production, services
including cartel, results in –

 Price fixing
 Quantity/supply limiting
 Market sharing
 Bid rigging/collusive bid
Vertical Agreements
Agreement between enterprises at different stage of production,
distribution etc. Agreement includes arrangement or understanding, oral, or in
writing, not necessarily enforceable by law.

Examples -
 Tie in arrangements
 Exclusive supply agreement
 Exclusive distribution agreement
 Refusal to deal
 Resale price maintenance
 Combinations
Combination covers the following -
 Merger & Amalgamation
 Acquisition
 Acquiring control
Any combination which causes or is likely to cause appreciable adverse effect
on competition (AAEC) is void.

Types of Combinations
 Horizontal - Between rivals and most likely to cause AAEC.
 Vertical - Between enterprises which are at different stages of production
chain.
 Conglomerate - Between businesses not in same line of business or in same
relevant market.
 The Competition Act, 2002 was amended in 2007 and 2009, after the
amendment of 2007 CCI was proposed to function as a judicial body, would now
act as an expert body in an advisory capacity to prevent anti-competitive
practices.

Brief details about Competition Commission of India

Administrative structure - It consists of 1 chairman and 6 members.

Functions -
 To prevent practices having AAEC.
 To promote and sustain competition.
 To protect the interest of consumers.
 To ensure the freedom of trade carried by market participants in market in
INDIA.