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 This article looks at the now repealed act in totality and the amendments which were made to it till the Competition Act, 2002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.

Restrictive Trade Practice

A restrictive trade practice is a trade practice, which

  1. Prevents, distorts or restricts competition in any manner; or
  2. Obstructs the flow of capital or resources into the stream of production; or
  3. Which tends to bring about manipulation of prices or conditions of delivery or effected the flow of supplies in the market of any goods or services, imposing on the consumers unjustified cost or restrictions.
INQUIRY INTO RESTRICTIVE PRACTICES
 
The Commission may inquire into any restrictive trade practice

  1. Upon receiving a complaint from any trade association, consumer or a registered consumer association, or
  2. Upon a reference made to it by the Central or State Government or
  3. Upon its own knowledge or information
RELIEF AVAILABLE
 
The commission shall if after making an inquiry it is of the opinion that the practice is prejudicial to the pubic interest, or to the interest of any consumer it may direct that.

  1. The practice shall be discontinued or shall not be repeated;
  2. The agreement relating thereto shall be void in respect of such restrictive trade practice or shall stand modified.
  3. The Commission may permit the party to any restrictive trade practice to take steps so that it is no longer prejudicial to the public interest
However no order shall be made in respect of

  1. any agreement between buyers relating to goods which are bought by the buyers for consumption and not for ultimate resale;
  2. a trade practice which is expressly authorised by any law in force.

Unfair Trade Practice

WHAT IS UNFAIR TRADE PRACTICE ?
 
An unfair trade practice means a trade practice, which, for the purpose of promoting any sale, use or supply of any goods or services, adopts unfair method, or unfair or deceptive practice.
 
Unfair practices may be categorised as under:

  1. FALSE REPRESENTATION
The practice of making any oral or written statement or representation which:

  1. Falsely suggests that the goods are of a particular standard quality, quantity, grade, composition, style or model;
  2. Falsely suggests that the services are of a particular standard, quantity or grade;
  3. Falsely suggests any re-built, second-hand renovated, reconditioned or old goods as new goods;
  4. Represents that the goods or services have sponsorship, approval, performance, characteristics, accessories, uses or benefits which they do not have;
  5. Represents that the seller or the supplier has a sponsorship or approval or affiliation which he does not have;
  6. Makes a false or misleading representation concerning the need for, or the usefulness of, any goods or services;
  7. Gives any warranty or guarantee of the performance, efficacy or length of life of the goods, that is not based on an adequate or proper test;
  8. Makes to the public a representation in the form that purports to be-
    • a warranty or guarantee of the goods or services,
    • a promise to replace, maintain or repair the goods until it has achieved a specified result, if such representation is materially misleading or there is no reasonable prospect that such warranty, guarantee or promise will be fulfilled
  1. Materially misleads about the prices at which such goods or services are available in the market; or
  2. Gives false or misleading facts disparaging the goods, services or trade of another person.
  1. FALSE OFFER OF BARGAIN PRICE-
Where an advertisement is published in a newspaper or otherwise, whereby goods or services are offered at a bargain price when in fact there is no intention that the same may be offered at that price, for a reasonable period or reasonable quantity, it shall amount to an unfair trade practice.
 
The "bargain pricea" for this purpose means-

  1. the price stated in the advertisement in such manner as suggests that it is lesser than the ordinary price, or
  2. the price which any person coming across the advertisement would believe to be better than the price at which such goods are ordinarily sold.
  1. FREE GIFTS OFFER AND PRIZE SCHEMES
The unfair trade practices under this category are:
    1. Offering any gifts, prizes or other items along with the goods when the real intention is different, or
    2. Creating impression that something is being offered free alongwith the goods, when in fact the price is wholly or partly covered by the price of the article sold, or
    3. Offering some prizes to the buyers by the conduct of any contest, lottery or game of chance or skill, with real intention to promote sales or business.
  1. NON-COMPLIANCE OF PRESCRIBED STANDARDS
Any sale or supply of goods, for use by consumers, knowing or having reason to believe that the goods do not comply with the standards prescribed by some competent authority, in relation to their performance, composition, contents, design, construction, finishing or packing, as are necessary to prevent or reduce the risk of injury to the person using such goods, shall amount to an unfair trade practice.
  1. HOARDING, DESTRUCTION, ETC.
Any practice that permits the hoarding or destruction of goods, or refusal to sell the goods or provide any services, with an intention to raise the cost of those or other similar goods or services, shall be an unfair trade practice.
  1. INQUIRY INTO UNFAIR TRADE PRACTICES
The Commission may inquire into Any unfair trade practice

  1. Upon receiving a complaint from any trade association, consumer or a registered consumer association, or
  2. Upon reference made to it by the Central Government or State Government
  3. Upon an application to it by the Director General or
  4. Upon its own knowledge or information.
  1. RELIEF AVAILABLE
After making an inquiry into the unfair trade practice if the Commission is of the opinion that the practice is prejudicial to the pubic interest, or to the interest of any consumer it may direct that.

  1. The practice shall be discontinued or shall not be repeated;
  2. The agreement relating thereto shall be void in respect of such unfair trade practice or shall stand modified.
  3. Any information, statement or advertisement relating to such unfair trade practice shall be disclosed, issued or published as may be specified
  4. The Commission may permit the party to carry on any trade practice to take steps to ensure that it is no longer prejudicial to the public interest or to the interest of the consumer.
However no order shall be made in respect a trade practice which is expressly authorised by any law in force.
 
The Commission is empowered to direct publication of corrective advertisement and disclosure of additional information while passing orders relating to unfair trade practices.

Monopolistic Trade Practices

A monopolistic trade practice is one, which has or is likely to have the effect of:

  1. maintaining the prices of goods or charges for the services at an unreasonable level by limiting, reducing or otherwise controlling the production, supply or distribution of goods or services;
  2. unreasonably preventing or lessening competition in the production, supply or distribution of any goods or services whether or not by adopting unfair method or fair or deceptive practices;
  3. limiting technical development or capital investment to the common detriment;
  4. deteriorating the quality of any goods produced, supplied or distribute; and
  5. increasing unreasonably-
    1. the cost of production of any good; or
    2. charges for the provision, or maintenance,of any services; or
    3. the prices for sale or resale of goods; or
    4. the profits derived from the production, supply or distribution of any goods or services.
A monopolistic trade practice is deemed to be prejudicial to the public interest, unless it is expressly authorized under any law or the Central Government permits to carry on any such practice.

INQUIRY INTO MONOPOLISTIC TRADE PRACTICES
 
The Commission may inquire into
 
Any monopolistic trade practice,

  1. Upon a reference made to it by the Central Government or
  2. Upon an application made to it by the Director General or
  3. Upon it own knowledge or information
RELIEF AVAILABLE

  1. Where the inquiry by the Commission reveals that the trade practice inquired into operates or is likely to operate against public interest, the Central Government may pass such orders as it thinks fit to remedy or present any mischief resulting from such trade practice.
  2. On an inquiry report of the Commission, the Central Government may-

    1. Prohibit the owner(s) of the concerned undertaking(s) from continuing to indulge in a monopolistic trade practice; or
    2. Prohibit the owner of any class of undertakings or undertakings generally, from continuing to indulge in any monopolistic trade practice in relation to the goods or services.
  3. The Central Government may also make an order:

    1. Regulating the production, storage, supply, distribution, or control of any goods or services by an undertaking and fixing the terms of their sale (including prices) or supply;
    2. Prohibit any act or practice or commercial policy which prevents or lessens competition in the production, storage, supply or distribution of any goods or services;
    3. Fixing standards for the goods used or produced by an undertaking;
    4. Declaring unlawful the making or carrying out of the specified agreement;
    5. Requiring any party to the specified agreement to determine the agreement within the specified time, either wholly or to specified extent;
    6. Regulating the profits which may be derived from the production, storage, supply, distribution or control of any goods or services; or
    7. Regulating the quality of any goods or services so that their standard does not deteriorate.

Powers of The Commission

The MRTP Commission has the following powers:

  1. Power of Civil Court under the Code of Civil Procedure, with respect to:

    1. Summoning and enforcing the attendance of any witness and examining him on oath;
    2. Discovery and production of any document or other material object producible as evidence;
    3. Reception of evidence on affidavits;
    4. Requisition of any public record from any court or office.
    5. Issuing any commission for examination of witness; and
    6. Appearance of parties and consequence of non-appearance.
  2. Proceedings before the commission are deemed as judicial proceedings with in the meaning of sections 193 and 228 of the Indian Penal Code.
  3. To require any person to produce before it and to examine and keep any books of accounts or other documents relating to the trade practice, in its custody.
  4. 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.
  5. To authorise any of its officers to enter and search any undertaking or seize any books or papers, relating to an undertaking, in relation to which the inquiry is being made, if the commission suspects tat such books or papers are being or may be destroyed, mutilated, altered, falsified or secreted.
PRELIMINARY INVESTIGATION
 
Before making an inquiry, the Commission may order the Director General to make a preliminary investigation into the complaint, so as to satisfy itself that the complaint is genuine and deserves to be inquired into.

Remedies under The Act

The remedies available under this act are-
 
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 a pre-judicial to the public interest or the interest of any trader or class of traders generally, or of any consumer or class of consumers, or consumers generally, the commission may grant a temporary injunction restraining such undertaking or person form carrying on such practice until the conclusion of inquiry or until further orders.
 
COMPENSATION
 
Where any monopolistic, restrictive or unfair trade practice has caused damage to any Government, or trader or consumer, an application may be made to the Commission asking for compensation, and the Commission may award appropriate compensation.
 
Where any such loss or damage is caused to a number of persons having the same interest, compensation can be claimed with the permission of the commission, by any of them on behalf of all of them.
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