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.

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.

The Monopolies and Restrictive Trade Practices was adopted by the government in 1969 and the MRTP Commission was set up in 1970. The Act extended to the whole of India excepting Jammu and Kashmir. It sought to achieve the following principal objectives

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.

In 1977, the government appointed the Sachar Committee to review the working of MRTP and make recommendations. The Committee made a number of recommendations and on their basis, the government introduced amendments in the Act in 1980 and 1984.

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).

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)

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 in any of the following ways:

1. If one owns or controls the other.2. Where the undertakings are owned by firms, if such

firms have one or more common partners.3. Where the undertakings are owned by the bodies

corporate : (a) if one body corporate manages the other body corporate, or( b) if one body corporate is the subsidiary of the other body corporate, …….

(c) If the bodies corporate are under the same management, (d) if one body corporate exercise control over the other body corporate in any other manner;

4. Where one undertaking is owned by a body corporate and the other is owned by a firm, if one or more partners of the firm: (a) hold, directly or indirectly, not less than 50% of the shares whether as directors or otherwise, over the body corporate;

5. If one is owned by a body corporate and the other is owned by a firm having bodies corporate as its partners, if such bodies corporate are under the same management;

6. If the undertakings are owned or controlled by the same group; and

7. If one is connected with the other, or through any number of undertakings which are inter-connected within the meaning of the one or more of the foregoing sub-clauses.

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.

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:

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

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)

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-

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;

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.

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

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.

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:

1. Which tends to obstruct the flow of capital or resources into the stream of production, or

2. Which tends to bring about manipulation of prices or conditions of delivery or to affect the flow of supplies in the market relating to goods or services in such manner as to impose on the consumers unjustified costs or restrictions.

A trade practice which has or may have the effect of preventing, distorting or restricting competition in any manner, is a restrictive 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-

1. Making false representations and misleading advertisements regarding the goods or services.

2. Publications of any advertisement for the sale or supply at a bargain price, of goods or services that are not intended to be offered for sale or supply at the bargain price.

3. 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.

4. Selling or supplying sub-standard, unsafe or hazardous products.

5. hoarding, destroying or refusing to sell in order to push up the price level.

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.

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.

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.

Competition Act, 2002, is designed for the following purposes:

1. Prohibition of anti-competitive agreements;2. Prohibition of abuse of dominant position;

and3. Regulation of combinations.