MRTP Act 1969 -Monopolistic and Restrictive Trade Practice under MRTP act,1969

The MRTP Act was introduced to provide that the operation of the economic system does not result in the concentration of economic power in hands of few. Through this article, an overview of the MRTP Act has been done including the salient features, the important provisions, the amendments which have been made over the years. This article looks at the now repealed act in totality and the amendments which were made to it till the Competition Act, 2002

Fri Apr 29 2022 | Civil Litigation and Others | Comments (0)

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The 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.

Unless the Central Government otherwise directs, this act shall not apply to:

  1. Any undertaking owned or controlled by the Government Company,
  2. Any undertaking owned or controlled by the Government,
  3. Any undertaking owned or controlled by a corporation (not being a company established by or under any Central, Provincial or State Act,
  4. Any trade union or other association of workmen or employees formed for their own reasonable protection as such workmen or employees,
  5. Any 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,
  6. Any undertaking owned by a co-operative society formed and registered under any Central, Provincial or state Act,
  7. Any financial institution.

Scope and features of MRTP, Act, 1969

The salient features of the MRTP Act of 1969 are as follows:

Aim of the Act:

MRTP Act came into existence on 1 June, 1970. The law was enacted with the sole aim of achieving the largest possible production with least damage to people, at large, whilst securing maximum benefit.

Scope of the MRTP Act, 1969

To first understand the salient features that govern the MRTP Act, 1969, it is important in order to truly understand the scope of its applicability. Following are the concepts tackled by the Act –

  • It followed a Command and Control Approach – The Act made it compulsory for enterprises having assets more than INR 20 crores to take approval from the Central Government before undertaking  any kind of corporate restructuring or  proposed takeover. A criterion was fixed to identify the dominant undertaking. Enterprises with assets of more than INR 1 crore were automatically deemed to be dominant.
  • Trade Practices which are monopolistic in nature – Monopolistic Trade Practices are covered under Chapter IV of the MRTP Act, 1969. These are the activities which are undertaken by Big Corporate Houses by exploiting their position in the market. This meant that activities which hamper or eliminate competition of healthy nature in the economic market were prohibited as these trade practices were anti-consumer.
  • Restrictive Trade Practices Restrictive Trade Practices are activities that stop the flow of capital or profits back into the market. Some businesses often tend to control the supply of goods or products in the market by either restricting production or taking control of the delivery. The Act disallows and ensures firms do not indulge  in these practices. .
  • Unfair Trade Practices – Unfair Trade Practices are acts of false and misleading nature related to goods and services by the firms. Section 36-A of the MRTP Act, 1969 explicitly prohibits firms from indulging in Unfair Trade Practices (UTPs). The provision against Unfair Trade Practices was inserted by the 1984 Amendment to the MRTP Act.

MRTP Act also allows for the establishment of the Commission of MRTP, which is to be a regulatory authority to deal with the offences under the MRTP Act. During its enactment, the MRTP Act being the first legislation which addressed competition law problems in India, it seemed to be a perfect legislation to catch the defaulting companies. However, with the wave of globalization that came post the 1991 reforms the  scenario in the country changed. A need for modification in the existing MRTP Act in order to keep pace with the rapidly changing economic scenario arose.

Loopholes in the MRTP Act and Subsequent Amendments:

Up until 1984, MRTP Act was successful in regulating the competition in the Indian market. However, by 1984, amendments were needed to update the act as per the needs of the economy. Following are the two major amendments made to the MRTP Act –

  • 1984 Amendment – This amendment was brought on the recommendations of the Sachar Committee. The amendment insured that Section 36A was added to the Act to protect the consumers against the unfair trade practices so that an effective action can be taken against them. Claims against fake and misleading advertisements, wrong representation of goods, false guarantees came under this Act.
  • 1991 Amendment  This amendment permitted the MRTP Act to be extended to the public sector and government owned companies. Post this amendment, private players, who function in the market, were no longer needed to take special permissions from the government before undergoing any reconstruction of the corporate nature. This amendment to the MRTP Act came to effect in the light of the New Economic Policy, which led to the opening of Indian economy. The License Raj which restricted the growth of the Indian economy was thus abolished.

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