MRTP Act “Rise, Fall and Need for Change Eco-Legal Analysis”

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MRTP Act: Rise, Fall and Need for Change: Eco-Legal Analysis


MRTP Act: Rise, Fall and Need for Change: Eco-Legal AnalysisThe Monopolistic and Restrictive Trade Practices Act, 1969, was enacted 1. To ensure that the operation of the economic system does not result in the concentration of economic power in hands of few, 2. To provide for the control of monopolies, and 3. To prohibit monopolistic and restrictive trade practices. The MRTP Act extends to the whole of India except Jammu and Kashmir.


India, in its formative years of freedom, laid down the seeds of socialistic approach towards economic development. Five-year plans were designed with the aim of self-rebalance and self-sufficiency of the Indian industry and in this process of indignity, focus was laid on strong governmental regime to ensure equal and prosperous distribution of resources. One such attempt of the state resulted in the enactment of the MRTP Act, 1969 with the basic aim of comprehensive control over direction, pattern and quantum of investment to ensure that wealth is not concentrated in the hands of the few. However, with the emergence of the new Industrial Policy statement of 1980, a need was felt for promoting competition in domestic market, technological up gradation and modernization which was then followed by the massive New Policy Reforms of 1991 which emphasized attainment of technological dynamism and international competitiveness, by opening up the Indian economy to foreign investment. This could not be met by the Indian industry since it was not in competitive terms with the rest of the world and operated in an over-regulated environment. Hence, as was concluded in the Raghavan Committee Report, 2000 changes were sought in the competition policies of India and thus, the MRTP Act was laid to rest. This project will trace the performance of the MRTP and point out the faults that led to its failure and thus its repeal by the Competition Act.

Overview of Topic

Objective of ProjectThis project is aimed at advocating and analysing the performance of the Monopolies and Restrictive Trade Practice Act, 1969 (henceforth, MRTP Act) in the Economic-Legal aspect. The project will primarily analyse the performance of the MRTP Act over the various Industrial development phases (From 1951 to post-1991 Reforms) and then try to establish how and why it paved the way for Competition Act, 2002. Thus, the basic aim is to establish the reasons for the failure of the MRTP and the subsequent reasons for the establishment of the Competition Act.

Pg.2 Post-Independence: Socialistic Industrial Regime Structure In the years preceding the enactment of the MRTP Act, 1969, India had only been a free nation for a little more than 15 years. Following independence, it had laid down the formative structure of its governance and organization on the touchstone of socialism. The socialist approach was inherent in the functioning of the government as it preached social and economic equality, which was later adopted in the Preamble to the Constitution of India [2] by the 42nd Amendment. In this process, the concept of planned economic development started since the early 1950s. However, this approach did not yield the desired result of socio or economic equality. The initial industrial licensing policies had not borne the planned results- instead, the market and the industries were showing negative trends and wealth was getting concentrated in the hands of the few. This was observed by the Hazari Committee in its 1967 Report on Industrial Planning and Licensing Procedure, 1955 where it found that working of the licensing system had resulted in disproportionate growth of some big industrial house. Similarly, the Mahalanobis Committee Report (1964) on Distribution and Level of Income reported that the top 10% of the population cornered 40% of the income while the 20 of the largest firms in India owned 38% of the total built up capital of the private sector.


The previous industrial policies had clearly not worked in the direction the state had hoped for since, post independence many new and big firms had entered the Indian market and they had little competition and thus, were trying to monopolize the market. Hence the need for a stricter policy regime was realised to safeguard the welfare of the consumers by removing barriers to competition in the Indian economy, and this resulted in the enactment of the MRTP Act, 1969 which came into force in June 1970. The primary objectives of the Act were listed down in the Preamble as follows: i) Regulate the concentration of economic power to the common detriment, ii) Control monopolies and monopolistic trade practices, iii) Prohibit restrictive trade practices, and iv) Regulate unfair trade practices.

Emergence of MRTP

To understand the objectives of the MRTP and for the understanding of this project, we will first proceed to discuss the primary concepts related to the project topic: 1) Monopolistic Trade Practices Section 2(i) of the MRTP Act, 1969 defines Monopolistic Trade Practice as trade practices that have the effect of preventing or lessening competition in the production, supply or distribution of any goods or in the supply of any services- by misusing ones power to use the market conditions, in

Primary Concepts

Pg.3 terms of production and sales of goods and services, and thus abuse its market position- are called monopolistic trade practices. Firms involved in monopolistic trade practice try to eliminate competition from the market by taking advantage of their monopoly and charge unreasonably high prices. This in effect leads to deterioration in the product quality and limits technical development. Thus, such practices are anti-consumer-welfare. 2) Restrictive Trade Practices Activities that firms indulge in that tend to block the flow of capital into production, in order to maximize their own profits and to gain control over the market- such activities are termed as Restrictive Trade Practices. Such firms also control conditions of delivery to affect the flow of supplies leading to unjustified costs of production and distribution- while establishing their monopoly in the market. 3) Unfair Trade Practices Section 36-A of the MRTP Act, 1969 which was inserted on the recommendation of the Sachar Committee Report, laid down as to what may be termed as Unfair Trade Practices: i) False representation and misleading advertisement of goods and services. ii) Misleading representation regarding utility, quality and standard of goods and services. iii) Giving false guarantee or warranty on goods and services without adequate tests. iv) False claims or representation regarding price of goods and services. v) Giving false facts regarding sponsorship, affiliation etc. of goods and services. vi) Making false or misleading representations of facts.

Doctrine of the ActThe MRTP Act, 1969 had its origin in the Directive Principles of State Policy embodied in the Constitution of India. Article 39[(b) and (c)] of the Constitution lay down that the State shall direct its policy towards ensuring: (i) that the ownership and control of material resources of the community are so distributed as to best serve the common good; and (ii) That the operation of the economic system does not result in the concentration of wealth and means of production to the common detriment. Thus, the doctrine behind the MRTP Act, 1969 was based on the concept of planned economic development that had started since early 1950s. The Public Sector Industrial (Development & Regulation) Act, 1951 and Monopolies and Restrictive Trade Practices Act, 1969 together commanded a comprehensive control over direction, pattern and quantum of investment. However, despite such control that the state exercised through these Acts, these did not entirely benefit the consumers rather, these complex network of controls and regulations fettered the freedom of the enterprises and yielded negative results for the economy.


FUNCTIONING AND PERFORMANCE: THE MRTP COMMISSIONFunctionsThe Monopolies and Restrictive Trade Practices Commission (MRTPC), a quasi- judicial body, was established under Section 5 of the MRTP Act, 1969 to take up action against companies that indulged in monopolistic and unfair trade activities. It discharged functions as per the provisions of the Act. The main functions of the MRTP Commission being: To enquire into and take appropriate action in respect of unfair trade practices and restrictive trade practices. In regard to monopolistic trade practices, to enquire into such practices: Upon a reference made to it by the Central Government, or Upon its own knowledge or information; Submit its findings to Central Government for further action. The Office of the Director General of Investigation & Registration was created in the year 1984 to perform certain statutory functions and duties under the MRTP Act, 1969 so as to subserve its objective to protect the interests of the consumers in the country.The Act was amended from time to time and major amendments took place in the years 1984 and 1991 and these reforms shall be discussed later in this project.

MechanismThe working of the MRTP Commission can be put down in the following steps: 1) As discussed above, the MRTP Commission was empowered under section 10 of the Act to take either suo motu action or action upon reference by the government, against companies that were deemed to be adopting restrictive, monopolistic or unfair practices. 2) All such trade practices were considered to be prejudicial to public interest. Hence, the onus was on the entity, body or undertaking charged with the perpetration of such trade practices, to plead under the MRTP Act to avoid being indicted. 3) If the pleadings were satisfactory to the Commission and if it was further satisfied that the restriction is not unreasonable, the Commission would arrive at the conclusion that the trade practice is not prejudicial to public interest and discharge the enquiry against the charged party. Furthermore, if a trade practice was expressly authorised by any law for the time being in force, the Commission was barred from passing any order against the charged party. 4) Otherwise, if the Commission deemed it to be fit, it could either: a) Give temporary injunction, or b) Award compensation.


CASES UNDER MRTP ACTA) Colgate Palmolive (India) Ltd vs. M.R.T.P. Commission & Ors on 20 November, 2002 Author: S.B. Sinha Bench: S Sinha. CASE NO.: Appeal (civil) 891 of 1993 PETITIONER: Colgate Palmolive (India) Ltd. RESPONDENT: M.R.T.P. Commission & Ors. DATE OF JUDGMENT: 20/11/2002 BENCH: CJI. & S.B.Sinha. JUDGMENT: JUDGMENT WITH CIVIL APPEAL NOS.2446 OF 1993 AND 2965 OF 1989 S.B. SINHA, J: Interpretation of Section 36A of the Monopolies and Restrictive Trade Practices Act, 1969 ('The M.R.T.P. Act') is in question in this batch of appeals which arise out of the judgments and orders passed by the Monopolies and Restrictive Trade Practices Commission ('the Commission'), New Delhi whereby and where-under advertisements issued by the appellant herein announcing a contest was held to be an unfair trade practice within the meaning thereof. The fact of the matter is being noted from Civil Appeal No.891 of 1993 Colgate Palmolive (India) Ltd. vs. Monopolies & Restrictive Trade Practices Commission & Ors. The appellant had inserted an advertisement in several newspapers in September, 1984 announcing a contest known as "Colgate Trigard Family Good Habits Contest". 'Trigard' is the name of tooth-brush manufactured by the appellant. By reason of the said advertisement, a contest apparently for the purpose of educating the families for inculcating good habit of taking care of dental health was announced. The brief particulars of the contest are as under:- As a condition precedent to participating in the contest each prospective participant was required to send two upper portion of the cartons in which the Trigard Tooth-brushes were sold. These two upper portions of the carton were to be sent along with each entry form which was required to bear the dealers' name and address duly rubber-stamped on the form. Obviously this necessitated the purchase of two Trigard Colgate brushes by a

Pg.6 prospective participant in the contest. The entry form contained four questions, each with two alternative answers which were also printed. The contestant was required to tick mark the correct answer. By way of illustration the appellant had already ticked the correct alternative in the case of first question which was as follows:- "Brush in the morning; (a) only in the morning; (b) in the morning and after every meal" In the form alternative (b) had been ticked. There were similar three questions with alternative answers. Anyone with an ordinary knowledge of dental health could tick mark the correct answer to those questions. But this was not enough. In addition to answering the questions as mentioned above, each contestant had to write a sentence not exceeding ten words describing as to why the contestant's family used Colgate Trigard Toothbrush. The best entry in this regard would win the first prize. There were several other prizes for second, third and fourth winners. In all there were fifty prizes. Appellant further offered 825 consolation prizes of Rs.100/- each and 1200 early bird prizes of Rs.50/- each to be awarded to those 100 entries which were received first every week. The last mentioned prizes were irrespective of whether the answers to the questions were correct or not and irrespective of the merit of the slogan which was to be provided by the contestant. A complaint was made to the Commission alleging that the said contest which was organised by the appellant for the purpose of promotion of sale of its product was in its own interest and prejudicial to the interest of the consumer generally as a result whereof serious injury or loss to the consumer concerned was caused. The complainant alleged that such contests fell within clause (b) of paragraph 3 of Section 36A of the M.R.T.P. Act. On receipt of the said complaint, an investigation was directed to be made, pursuant whereto and in furtherance whereof, upon an enquiry, a preliminary investigation report was submitted by the Director General, who also came to the conclusion that the said contest was covered by Section 36A(3)(b) of the M.R.T.P. Act.

Pg.7 In terms of the recommendations made by the Director General, a notice of enquiry dated 3rd December, 1984 was issued, the relevant portion whereof reads thus :"AND WHEREAS on perusal of the abovesaid complaint and preliminary investigation report submitted by the Addl. Director General, it appears to the Commission that the Respondent is indulging in the Trade Practice of conducting a contest (Colgate Trigard Family Good Habits Contest) for the purpose of promoting the sale of its product (Tooth Brushes) and also for the purpose of indirectly promoting its business interest; AND WHEREAS it appears to the Commission that such trade practice is an unfair trade practice causing injury and loss to the consumers (of tooth brushes); AND WHEREAS it appears that the said contest is arbitrary in nature and eliminates competition among the manufacturers of tooth brushes and thus amounts to a restrictive trade practice:" The appellant herein filed his reply pleading, inter alia, that such contest did not cause loss or injury to the consumers by eliminating and restricting competition or otherwise. It was contended that the contest was educative inasmuch as by inducing the users of the tooth-brushes to think upon the questions of the contest, they would be made aware of the necessity to keep good dental health. It was pointed out that the best answer to the question was to be judged by three eminent persons from different fields being the Editor of Illustrated Weekly, the Editor of Eves Weekly and a T.V. personality and thus there was no element or chance of arbitrariness in the selection of the winning slogan. A Bench of the Commission consisting of Mr. H.C. Gupta and Mr. D.C. Aggarwal heard the said enquiry. Mr. Gupta came to the conclusion that there was no loss or injury caused to the consumers; whereas Mr. Aggarwal differed from the said view holding that the loss or injury was inherent in the case of trade practices mentioned in paragraph 3 of Section 36A of the MRTP Act.

Pg.8 As the members of the Division Bench of the Commission did not formulate any question to be decided by a third member, the matter was directed to be heard by a Full Bench. By reason of the judgment under appeal, the Commission, inter alia, agreed with the following findings of Mr. Aggarwal : ".."and thereby causes loss or injury to the consumers" are words of description which indicate that the trade practice described in Section 36A of the Act are vehicles of loss or injury." It was further held: ".The contest ceases to be innocent if it is held for the purpose of promoting the sale or the business interests of the organiser of that contest. Some of the features of the contest under examination may be noted. The contest induces the consumer to buy minimum two tooth brushes to enable him to participate in the contest. If he wants to send more entries he is naturally required to purchase proportionately greater number of tooth brushes. There is no ceiling on the number of entries to be sent by the contestant. An obnoxious feature of this contest is about the prizes which were awarded to the persons whose entries were received early in the week. This aspect of the contest has nothing to do with the skill and was based totally on chance. The number of losers in terms of money in this part of the contest cannot be insignificant. The early bird aspect of the contest was purely in the nature of lottery." Mr. Ashok Desai, learned Senior Counsel appearing on behalf of the appellant would, in support of the Appeal, urge that the Commission committed a manifest error of law in arriving at the aforementioned conclusion by misreading and misinterpreting the provisions of Section 36A(3)(b) of the M.R.T.P. Act. The learned counsel pointed out that the Commission did not find any actual loss or injury caused to the consumers by reason of the said advertisement nor any allegation in that behalf had been made. It was submitted that in a case of this nature even no public interest was involved. In support of this contention, the learned counsel has placed strong reliance upon a judgment of a Division Bench of this Court in H.M.M. Ltd. v. Director General, Monopolies & Restrictive Trade Practices Commission [(1998) 6 SCC 485] , (wherein one of us Hon. G.B. Pattanaik, CJI. was a member).

Pg.9 Section 36A(3)(b) as it stood at the relevant time reads as under :"36A. Definition of unfair trade practice, In this Part, unless the context otherwise requires, "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 consumers of such goods or services, whether by eliminating or restricting competition or otherwise, namely:3(b) the conduct of any contest, lottery, game of chance or skill, for the purpose of promoting, directly or indirectly, the sale, use or supply of any product or any business interest;" A bare perusal of the aforementioned provision would clearly indicate that the following five ingredients are necessary to constitute an unfair trade practice: 1. There must be a trade practice (within the meaning of section 2(u) of the Monopolies and Restrictive Trade Practices Act); 2. The trade practice must be employed for the purpose of promoting the sale, use or supply of any goods or the provision of any services; 3. The trade practice should fall within the ambit of one or more of the categories enumerated in clauses (1) to (5) of Section 36A; 4. The trade practice should cause loss or injury to the consumers of goods or services; 5. The trade practice under clause (1) should involve making a "statement" whether orally or in writing or by visible representation. Causation of loss or injury thus is a sine qua non for invoking the principles of Section 36A of the M.R.T.P. Act. The Commission, in our considered opinion, committed a manifest error in holding that the actual loss or injury is not an essential ingredient of the unfair trade practice. It is now a well-settled principle of law that a literal meaning should be assigned to a statute unless the same leads to anomaly or absurdity. The terminology used in the provisions is absolutely clear and unambiguous. As noticed hereinbefore, in terms of the aforementioned provisions not only a trade practice is resorted to for the purpose of promoting sale or use or supply of any goods or services, as specified therein but thereby

Pg.10 loss or injury to the consumers of such goods or services must be caused. The word 'thereby' must be assigned its plain meaning for interpretation of the aforementioned provision. In H.M.M. Ltd's case (supra), this Court has clearly held that for holding a trade practice to be an unfair trade practice, it must be found that it had caused loss or injury to the consumer. We may notice that on or about 1993 an amendment has been made whereby the words "causing loss or injury to the consumer" were omitted which also goes to show the law as it stood thence, 'loss or injury to the consumer' was a pre-requisite for attracting the provisions of Section 36A(3)(b) of the Act. In interpreting the said provision, the 'Mischief Rule" should be resorted to. For the view, we have taken, the impugned judgments cannot be sustained, which are set aside accordingly. The appeals are allowed but in the facts and circumstances of the case, there will be no order as to costs.

B) Colgate Palmolive (India) Limited vs M/s. Hindustan Lever The first respondent, Colgate-Palmolive (India) Ltd. manufactures Colgate Dental Cream. The appellant too has various brands of tooth paste but we are concerned here with the New Pepsodent' toothpaste introduced by the appellant recently into the market. The appellant had given advertisement in the print, visual, and boarding media, claiming that its toothpaste "new Pepsodent" was "102 % better than the leading toothpaste". The advertisement contains a "schematic' picture supposedly of samples of saliva It depicts on one side of the advertisement a pictorial representation of the germs in a sample taken from the mouth of a person hours after brushing with "the leading toothpaste." And another pictorial representation is or the germs from a similar sample taken from the mouth of another person using the "New Pepsodent". The former shows large number of germs remaining in the sample of saliva where the leading toothpaste is used and the latter shows almost negligible quantity of germs in the sample of saliva where New Pepsodent' is used. The advertisement also speaks of tests conducted at the Hindustan L ever Dental Research Centre and says that the appellant's product is based on a Germ check formula which is twice as effective on germs as the leading toothpaste and that it was, in fact, 102% better in fighting germs. In the TV advertisement of the appellant, two boys are asked the name of the

Pg.11 toothpaste with which they had brushed their teeth in the morning. The advertisement shows Pepsodent 102% superior in killing germs which is being used by one of the by. So far as the other boy is concerned, who is using another toothpaste which is inferior in killing germs, the lip movements according to the respondents, indicated that the boy was using "Colgate" though the voice is muted. Additionally, when this muting is done there is a sound of the same jingle as is used in the usual Colgate- advertisement, leaving, according to the complainants, doubts in the minds of the viewers that "Pepsodent" was being compared with Colgate. On these and other allegations, the complaint was filed by the respondents before the Commission relying upon Sections 10, 36A and 36B of the Act and in particular upon Section 36A (viii) and (x) of the Act. Facts of the case

Plaintiff company: Colgate Palmolive (India) Limited, manufacturers of Colgate Dental Cream. Defendant : M/s. Hindustan Lever Limited manufacturers of New Pepsodent dental cream

Allegation: Advertisement campaign of the defendant regarding its dental cream New Pepsodent disparaging the leading toothpaste namely Colgate Dental Cream manufactured by Plaintiff.

A jingle used in the background of the ad which closely resembled that of Colgate Palmolive India's jingle. In the ad when the child using the leading toothpaste is questioned, he mouthed out the words Colgate which was clearly visible. HLL claimed 102% anti-bacterial superiority over the leading brand, however their

Advertisements gave an overall impression of being better than the leading brand in dental care. C) Shyam Gas Company Case This was a case where the supply of cooking gas cylinders was in short supply, which led to unfair exploitation of the situation. Shyam Gas Co. was the sole distributor of BPCL for cooking gas cylinder at Hathras (U.P.) which was allegedly engaging in the following restrictive practices: giving gas connections to the customer only when he purchased a gas stove or a hot plate from the company; and charging customers twice the price for supply of fittings and appliances. The MRTP Commission held that the company was indulging in a restrictive trade practice that was prejudicial to the interest of the consumers. D) Bal Krishna Khurana Case This was the first case where a sales promotion organizer was charged under unfair trade practices. The respondent, Bal Krishna was famous all over North India for his selling export quality hosiery at extremely low prices wherein he sold goods worth Rs. 210/- for as low as Rs. 15/-

Pg.12 The Commission received complaints from consumers who reported that they were being cheated into buying sub-standard goods. The Commission then put a restraining order against Bal Krishna from organizing any such promotion ventures. In addition, the Commission also advised newspapers against carrying any such misleading advertisements.

The MRTP Commissions performance can be understood by looking at the data which shows the functioning of the Commission in its last phase (till 2007), depicting the volume of inquiries commissioned and reliefs awarded. A) Under Restrictive Trade Practices Figure 1: Enquiries Considered and Disposed of by MRTP Commission as of 31.12.2004 (RTP) B) Under Unfair Trade Practices Figure 2: Enquiries Considered and Disposed of by MRTP Commission as of 31.12.2004 (UTP)


Continuing from the last chapter, we have observed by comparing the industrial data that over the course of 4 decades from the time MRTP was enacted, the industry reacted in manners not suitable to the consumer. In this chapter, the researcher will discuss the other facets relating to the problems associated with the MRTP. Anti-Welfaristic Results Though the MRTP was enforced with the aim of distribution of resources and leveraging of competition in the market, the desired results could not be obtained. Rather, the market conditions turned out to be hostile for the consumer, and small-businesses and big-businesses alike, were subjected to excessive control. The heightened governmental control, where new undertakings and ventures were severely restrained by complex procedures, created conditions wherein the firms, existing and new, found it difficult to survive and thus, could not give back any benefits to the consumer. Stringent Provisions The Act aimed at abolishing all acts which were anti-competition. The Act, over the years became very active in taking on firms head-on to make them stand in line with the provisions of the Act. The provisions, though aimed at benefitting the consumers and the industrial growth, often played out tough- and the stringent provisions did not benefit anyone. For instance, the concept of Predatory Pricing, which is still a marketing policy adopted by companies to have an edge over their competitors, was handed down heavily by the MRTP Commission. Predatory Pricing is defined as pricing a good or service below the cost of production of the good or service, with the objective of driving a competitor out of trade or to discipline him and thereby achieve elimination of competition. This is a means for a firm with strong market power to eliminate other competitors and then, dominate the market.


Pg.13 This is effectively an anti-competitive mechanism, however, it can also be used to drive competition i.e. it can be effectively used to establish a strong competitive market. Examples are ripe in the current market where there are strong competitive conditions for the firms- they have to dole out quality at the best price to keep themselves established in the market, otherwise other competitive firms will drive them out of business. Examples being: A) Tide, a detergent that was introduced in the Indian market in 2000 was successful in breaking into a market which was strongly held by Surf (so much so, that households used to use Surf as a generic term for any kind of detergent). Tide used strong pricing, backed by its robust parent company, predatory in nature, to quickly grab a large market share for itself. It offered quality detergent at a price than the other existing detergents. This in turn made the other companies lower their price and offer better quality. Hence, the consumer emerged the winner from this competitive trend between the detergent makers. B) Tata Docomo, a mobile service provider that rolled out only 2 years back in the Indian market, entered at a time when there were established players in the market like Airtel, Reliance and state-run BSNL. But Docomo with its pricing policy which was unlike the prevailing market conditions, offered calling rates which changed the pulse. The market prior to the arrival of Docomo was based on per/minute charges, but Docomo came up with a per/second policy- thus, forcing other established players to also offer similar rates. Though such strategy was predatory in nature, but it helped in establishing a more competitive market which only went onto help the customers. Thus, the point that the researcher is trying to drive home is that such predatory pricing is not necessarily anti-competitive but rather an agent to bring about better options for the consumer. Hence, this is more beneficial in terms of consumers welfare. However, the MRTP Commission took up a strong case against such pricing and though it aimed at benefitting the market by ensuring fair competition, it instead closed down on the benefits to the customers. Hence, what was then required is a strong, case-by-case basis of handling and not absolute ban on predatory pricing. Ambiguity in Law The MRTP Act, 1969 contained only one particular section, Section 2(o) to cover all anti-competition practices- defining Restrictive Trade Practice as a trade practice which prevents, distorts or restricts competition and thus, by defining it in such broad terms that it was then believed that there is no need for a new specific law or provision to govern such practices. While complaints relating to anti-competition practices could be tried under the generic definition of restrictive trade practice, the absence of specific identifiable anti-competition practices gave room to different interpretations by different Courts of Law which resulted in the true meaning getting lost. While a generic definition might be necessary and might form the substantive foundation of the law, it is of great essence that there be a stronger specific legislation to cover all possible aspects of abuse of market position.

Pg.14 Furthermore, some of the anti-competition practices like cartels, bid rigging and other practices are not specifically mentioned in the MRTP Act but the MRTP Commission, over the years, had attempted to fit such offences under one or more of its sections by way of interpretation of the language used therein.

Post 1991 and the WTO Regime, the MRTP was exposed to lack the resources to handle the incoming international investments or to meet the trade requirements of the WTO. The Act was amended in many ways to accommodate for the New Policy Reforms of 1991 however such amendments could not bring it at par with the other anti-competition regimes in the World. Hence, the MRTP Act, 1969 was lacking and deficient in certain ways and thus, need for a new, comprehensive law was recognized which gave birth to the Competition Act, 2002 which is discussed in the next chapter.

International Norms

MRTP Act repealed and is replaced by the Competition Act, 2002, with effect from September 1, 2009. The Ministry of Corporate Affairs, Government of India has issued a Notification dated 28th August 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, with effect from September 1, 2009. As the MRTP Act was a grim reminder of the licence-quota- permitraj of 1970s & 1980s. The Act had become redundant post July 1991 when the new economic policy was announced and Chapter III of the MRTP Act dealing with restrictions on M&A activities was made inoperative. The MRTP Commission will continue to handle all the old cases filed prior to September 1, 2009 for a period of 2 years. It will, however, not entertain any new cases from now onwards. In October, 1999, the Government of India appointed a High Level Committee on Competition Policy and Competition Law to advise a modern competition law for the country in line with international developments and to suggest a legislative framework which may entail a new law or appropriate amendments to the MRTP Act. The Committee presented its Competition Policy report to the Government in May 2000. Subsequently, the draft competition law was drafted and presented to the Government in November 2000. After some refinements, following extensive consultations and discussions with all interested parties, the Parliament passed in December 2002 the new law, namely, the Competition Act, 2002.


Pg.15 The following transitional provisions would apply as provided in Section 66 of the Competition Act, 2002:1.

MRTP Commission

a) The MRTP Commission 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. 2. 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:a) Monopolistic or restrictive trade practice cases: All 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: 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. c) Cases relating to giving false or misleading facts disparaging the goods, services ortrade 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. 3. 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: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.

Pg.16 The two acts on competition policy of the Indian market, are based on the same touchstone of facilitating competition. However, owing to the many reforms in the industrial policy and the time-setup of the two legislations, there are differences between the two which are enlisted below:

MRTP v/s Competition Act

MRTP ACT, 1969


Based on the pre-reforms scenario. Based on size as a factor. Competition offences implicit or not defined.

Based on the post-reforms scenario. Based on structure as a factor. Competition offences explicit and defined.

Complex in arrangement and language Frowns upon dominance Registration of agreements compulsory.

Simple in arrangement and language and easily comprehensible. Frowns upon abuse of dominance. No requirement of registration of agreements.

Competition Commission appointed by the Government.

Competition Commission selected by a Collegium. Relatively more autonomy for the Competition Commission

Very little administrative and financial autonomy for the MRTP Commission. No penalties for offences. Reactive and rigid.

Penalties for offences. Proactive and flexible.


CONCLUSIONThe primary objective of this project was to analyze the MRTP Act, 1969 and then to draw conclusions as to why there was a need for change in the enactment. This has been attempted by first, looking at the need for the enactment of the MRTP Act, then appreciating the functioning of the MRTP Commission in terms of its functions and cases handled. Finally, we looked at what aspects was the MRTP legislation lacking in and then, talking about the new legislation, i.e. the Competition Act, 2002. After undergoing this exercise of tracing the MRTP Act, 1969 from its inception to the impact it has had on the market- the industrial development and the welfare of the consumers- the researcher is now in a position to affirm with the finding of the Raghavan Committee Report (2000) that had first suggested the substitution of the MRTP Act with a new competition regime, namely the Competition Act, 2002. Since then, economists, lawyers and industrialists have hailed the decision of the Ministry of Corporate Affairs to overhaul the MRTP and make way for the legislation of the Competition Act, 2002 to bring Indias competition regime in conformity with the international standards. Having spanned the Industrial data, through the 50 year time-frame of pre-1991 Reforms and post-1991 Reforms and having gone through the competitive policies the MRTP lacked in, the researcher is content with the replacement of the MRTP with the Competition Act. The changes brought about in the 1991 Reforms opened up the market in more ways than one. And hence, one can safely conclude that keeping with Indias liberalization, MRTP had become undesirable, rather, an obstacle to the growth story and thus, had to undergo multiple amendments in the period following the 1991 Reforms. Lastly, to drive the researchers observation home, it is imperative to say that is that while the focus of the MRTP was on controlling the concentration of economic power, the focus of the Competition Act on ensuring free and fair competition in the markets. Moving away from the MRTP ideology, the spirit of the Competition Act can be rightly captured in what the economist Dr. S. Chakravarthy quoted: Big is no more bad, hurting competition and interest is. Hence it can be safely inferred that the toothless MRTP Act was laid to rest by the Competition Act and, rightly so.