India has been a country from the very beginning where competitive markets have always existed. Socialism was prevailing in the country during the reign of Indira Gandhi. Big organizations are beginning to be considered with doubt. Therefore, a number of committees were formed by the government to create a system that could regulate the accumulation of wealth in the hands of a selected number of entities. [1] The article is a detailed analysis of MRTP Act, 1969 and MRTP (Amendment) Act, 1991.
Historical Background
Committees that were appointed for the formation of the MRTP Act, 1969 are –
Hazari Committee (1951)– It was formed to review the licensing process under industrial policy under the chairmanship of Mr Hazari. This committee reveals in its report that large companies have succeeded in quashing business policy laws in order to satisfy their personal egocentric interest. [2]
Subimal Dutt Committee – This has been formed to examine the pattern and design of work of various organizations. After examination, it was found that 56% of the country’s economy of the country was dominated by just 73 business houses.[3]
Mahalanobis Committee on the Distribution of Income and Levels of Living (1964) – Mahanlobis became the head of this committee. He found a consolidation of power and wealth in the few private entities’ in his report, and he also stated that the country’s model was planned in a way that it supported only the rich people hence it should be changed.[4]
Monopolies Inquiry Commission [MIC] (1965)– This committee was headed by Justice K.C Das Gupta. He found in his report that the consolidation of power in private entrepreneurs was high and that industrial policies like IPR and licencing were not effective in solving this problem. Also, there was no legislation to control violations that existed in the market at that time. Therefore, the Monopolies Inquiries Commission (MIC) drafted a bill to curb trade practices that were monopolistic and restrictive. This bill changed into the MRTP Act, 1969. [5]
A lot of discussions happen in the press and parliament on the recommendations that were presented by the Monopolies Inquiry Commission. It was felt that the recommendations were effective in maintaining a balance between economic development and equity. With the Monopolies Enquiries Commission, the Government of India agreed to make sure that cumulation of power should now no longer stay in the arms of a few selected private entities and a permanent commission should be established to govern monopolistic and restrictive trade policy. Therefore, on August 18, 1967, the Monopolies and Restrictive Trade Practice Bill was introduced. After this on December 27, 1969, this bill received the assent of the President after having been passed by both the houses of parliament and came into force on June 1, 1970.[6]
International predecessors, such as the Sherman Act and the US Clayton Act, the 1948 MRTP (Inquiry and Control) Act and the U.K. Resale Prices Act, 1964, etc., greatly influenced the new MRTP Act.
MRTP Commission
The Monopolies and Restrictive Trade Policy (MRTP) is a significant organ of the Department of Company Affairs. It was a quasi-judicial body. MRTP was set up under section 5 of the Monopolies and Restrictive Trade Policy (MRTP) Act, 1969 to perform its duties in compliance with the provisions referred to in the Act. The MRTP Commission’s primary role is to evaluate and take powerful action with respect to ‘unfair trade policies and restrictive trade practices.’ This Commission is empowered to review certain matters under section 10(b). The President of this Commission is expected to be a person who is or has been qualified to be a judge of the supreme court or high court. Powers of the MRTP commission include powers which are vested in a Civil Court. The Commission has the authority under section 18 of the Act to govern (i) the process and conduct of its business; (ii) the procedure of benches of Commission.[7]
Aim and Objective
- To guarantee that the functioning of the economic system does not contribute to the accumulation of economic dominance in the hands of a few powerful individuals.;
- To put restrictions on unfair trade practices; and
- To provide for the monopolies to be controlled;
- For prohibition of monopolistic and restrictive commercial policies;
Except for Jammu & Kashmir, this bill is applicable to the entire of India. Also, this is not applicable on government-owned companies or companies which are formed by centre/state government, trade unions, any financial institution, or companies which are overtaken by the government and companies which are registered through cooperative societies.[8]
Main Issues which were Addressed under the Act
Command and Control Approach – Before some kind of corporate merger or acquisition, the Act made it mandatory to accept the Central Government’s approval for firms with assets above Rs. 20 crores. There was also a fixed standard for the description of the dominant undertakings. Companies with assets greater than Rs. 1 crore are automatically known as dominant.[9]
Monopolistic Trade Practice (MTP) -By manipulating their market place, the activities carried out by Big Business Houses are MTPs as covered by Chapter IV of the MRTP Act, which hampers or suppresses healthy market rivalry. These policies are anti-consumer-welfare.
Restrictive Trade Practice (RTP) – RTPs are operations that obstruct the movement of resources or income in the market. Any businesses seek to regulate the global supply of goods or items by either regulating output or managing distribution. MRTPA discourages such businesses from indulging in RTPs and prohibits them.[10]
Unfair Trade Practice (UTP) – UTP is essentially a false, deceptive, misleading or unethical representation of evidence relating to the products and services provided by businesses. Section 36-A of the MRTPA bars companies from participating in non-ethical economic practices (UTPs). This provision was applied to the MRTPA by the 1984 Amendment.[11]
Amendments to replace The MRTP Act, 1969
Until 1984, MRTP largely dominated the competition in the Indian industry. But by 1984, due to the needs of society, it was appropriate to make some changes to the MRTP Act, 1969.
1984 Amendment – This amendment was based on proposals from the Sachar Committee. Section 36A of the Act was introduced in the amendment to protect final customers from deceptive market practices and was also introduced so that meaningful steps can be taken against them. Therefore, the Act was immune to charges against misleading advertising, the dishonest portrayal of products, false promises.[12]
1991 Amendment – Reforms that were made in the amendment made it possible to extend the MRTP Act to the public sector and also to companies owned by the government. Since this provision, private players do not require prior permission of the government to carry out any corporate reconstruction. This reform occurred in light of the New Economic Policy that caused the outlet of the Indian Economy. After these amendments Licence, Raj which obstructed government trade growth was abolished. [13]
Reason Behind Amendment in the MRTP Act, 1969
- Excessive Government Control – Both small and large corporations have been subject to unnecessary government regulation under the MRTP Act. it was necessary for the corporations to take approvals from the government prior to any reconstruction and merger. The existence of these complicated processes made it impossible for many businesses to succeed, thereby impacting the final customers.[14]
- Vague and ambiguous law – The term ‘restrictive trade practices’ was defined in section 2(o) of the MRTP Act, which covered any activity that prevented, distorted or restricted competition, confusing and contradictory laws. There was no specific provision outlining the particular types of anti-competitive conduct that under the Act would be termed as offenses. There was nothing to describe anti-competitive activities, such as cartels, bid-rigging, abuse of power, collusion, market theft, predatory pricing, etc. [15]
- A Policy of Voluntary Disclosure – The MRTPA machinery relied heavily on voluntary disclosures made by the businesses as there was no body capable of controlling the market management and structuring of 24 * 7 enterprises. This proved to be major leniency for businesses that led to delayed registrations or even no improvement in the structure of the business. It acted as a way of keeping the business out of the Act’s regulation.16]
- Inefficiency of the MRTP Commission – To curb anti-competitive activities in the region, the MRTP Commission was set up. However, since all administrative and judicial roles were undertaken by the MRTPC, the Commission members have been appointed by the government itself, creating doubt as to the independence of its functioning. The Commission was unable to perform its duties adequately and effectively because of the following reason –
- Undue delays in withdrawing members from the Commission.
- The failure of the government to instantly appoint representatives or to open new branch offices.[17]
- Obsolescence – The MRTP Act quickly became obsolete after the New Economic Policy Changes, with the dynamic movement of the Indian trading market into a free and more globalized economy. It could not sustain the time checks that demanded a review of India’s competition law policies in accordance with the current problems emerging as a result of the entry of large-scale international companies into India.[18]
- No Extraterritorial Application – Though their anti-competitive behavior had a negative effect on the Indian economy, this could not be applied to undertakings outside India. Therefore, the MRTP Act was meaningless when it came to activities like international cartels.[19]
- No Penalty for offences – The Commission was not entitled to enforce draconian penalties or fines on the defaulters. The best it will do is give orders for ‘cease and desist’ or charge small fines. Jail sentences have not been enacted regularly.[20]
MRTP Company Definition
Companies with resources of Rs. 25 Crore or greater were required to obtain approval from the State of India and were known as MRTP companies. This upper bound was regarded as the MRTP limit of Rs. 25 Crore. It was later relaxed in 1980 to Rs. 50 crores, in 1985 to Rs. 100 crores and this cap was abolished in 1991. The firms with more than 25% market share are also considered monopolies.[21]
Conclusion
Monopolistic and Restrictive Trade Practice (MRTP),1969 was enacted to ensure that the working of the economic system does not contribute to the accumulation of economic power in the hands of the few. In the Indian markets, this Legislation effectively regulated rivalry until 1984. However by 1984, such changes were required to access the Act as per the needs of society. This Act promoted the prohibition of trade practices which were monopolistic and restrictive. Although it was not meant for all segments of the financial system and did not refer to the government sector, public sector undertakings and commitments of the central and state governments. Corporate entities, financial institutions, the State Bank of India and Indian insurance companies which have restricted the reach of the Act. As a result, in 2003, the Competition Act 2002 was enacted by the Parliament of India.
REFERENCES
[1] Dr S. Chakravarthy, Why India Adopted New Competition Law, 2008 CUTS Int’l (2008).
[2] R.K. Hazari, Industrial Planning and Licensing policy Report, Government of India, Planning Commission, 1951.
[3] INDIA & DUTT, S. (1969). Report of the Industrial Licensing Policy Inquiry Committee.
[New Delhi], Dept. of Industrial Development.
[4] INDIA & MAHALANOBIS, P. C. (1964). Report of the Committee on Distribution of
Income and Levels of Living. New Delhi, Government of India, Planning Commission.
[5] Kulshreshtha, v. D. “REPORT OF THE MONOPOLIES INQUIRY COMMISSION: AN
EVALUATION.” Journal of the Indian Law Institute, vol. 8, no. 3, 1966, pp. 413–427.
[6] The Competition Act of 2002.
[7] By D.N. Saraf, Monopoly and Restrictive Trade Practices Commission in action some
reflection on consumer protection, Vol. 31, No. 3 (July-September 1989), pp. 289-317 (29
pages).
[8] Monopolistic and Restrictive Trade Practices (MRTP) Act, 1969, available at: https://www.owlgen.in/what-is-monopolistic-and-restrictive-trade-practicesmrtp-act-1969/
(Last visited on December 08, 2020).
[9] Mohammad Asad Mahmood, Critical Analysis of Competition Law in India,
Latestlaws.com.Mohammad Asad Mahmood, Critical Analysis of Competition Law in India,
Latestlaws.com.
[10] R. Shyam Khemani, India’s Competition Policy Reforms, 30 Int’l Bus. Law. 7 (2002).
[11] Shiju Varghese Mazhuvanchery, The Indian Competition Act: A Historical and
Developmental Perspective, 3 Law & Dev. Rev. 241 (2010).
[12] Narayana Rao Rampilla, Developing Judicial Perspective to India’s Monopolies and
Restrictive Trade Practices Act of 1969, A, 34 Antitrust Bull. 655 (1989).
[13] Sarbapriya Ray; Ishita Aditya Ray, Emergence and Applicability of Competition Act, 2002 in India’s New Competitive Regime: An Overview, 1 J.L. Pol’y & Globalization 15 (2011).
[14] Sahil Parikh, Background and Basics of Competition Law, S.H. Bathiya & Associates, September 21, 2012.
[15] Haridas Exports v. All India Float Glass Manufacturers Association (2002) 6 SCC 600.
[16] Vijay Kumar Singh, Competition Law and Policy in India: The Journey in a Decade, 4
NUJS L. Rev. 523 (2011).
[17] S. Chakravarthy, India’s New Competition Act 2002 – A Work Still in Progress, 5 Bus. L.
Int’l 240 (2004).
[18] Dorothy Shapiro, A Competition Act by India, for India: The First Three Years of
Enforcement under the New Competition Act, 5 Indian J. Int’l Econ. L. 59, (2012).
[19] Aditya Bhattacharjee, India’s New Antitrust Regime: The First Two Years of Enforcement,
57 Antitrust Bull. 449, (2012).
[20] Amit Kapoor, Competition Regulation-history, Insights and Issues for the Way Forward,
2009 Manupatra (2009).
[21] Monopolies and Restrictive Trade Practice Act 1970, available at:
https://www.gktoday.in/gk/the-monopolies-and-restrictive-trade-practices-act1970/#:~:text=to%20unjustified%20costs.%E2%80%9D,What%20is%20MRTP%20Company%3F,was%20known%20as%20MRTP%20limit ( Last visited on December 08, 2020).
BY DEEPIKA DHAWANIYA | NATIONAL LAW UNIVERSITY, JODHPUR