MRTP ACT:

MAIN FEATURES

 1. Authorities under the Act

 2. Concentration of Economic Power
 3. Restrictive Trade Practices
 4. Monopolistic Trade Practices
 5. ‘Unfair Trade Practices’—A new concept introduced by the MRTP
(Amendment) Act,
 6. Comments on MRTP Act
 7. MRTP Amendment Ordinance 1991.
MAIN FEATURES

 Authorities under the Act:

The main administrative body under the Act is the MRTP

Commission. The MRTP Act lays down provisions detailing the
terms of office, conditions of service of members, and the
appointment of directors. The Commission is a quasi-judicial
body, and investigates complaints into monopolistic and restrictive
trade practices.
 Concentration of Economic Power:
Scheme of the Act to prevent the concentration of economic
power is to make compulsory the registration of all enterprises
which are of a certain size and those which have more than a
certain share of the market. The idea behind registration is that
this makes it impossible for registered concerns to make any
further expansion without permission from the Central
Government.
 Restrictive Trade Practices:
 Other key concepts in the MRTP Act are restrictive trade practices,
monopolistic trade practices and unfair trade practices. In order to control
these trade practices, the prime instrument is the registration of
agreements relating to restrictive trade practices. Section 33 details 12
particular types of agreement which are, by definition, restrictive such as
Resale Price Maintenance, Price Fixing Agreements etc.
 Any agreement which contains characteristics of these agreements will have
to be registered with the authorities, the rationale behind registration being
that companies will not want to lose goodwill-by having such unethical
agreements on public display, and so will avoid getting into such agreements.
 Only if the company can show that certain good results will follow
from restrictive trade practices, which outweigh the harm from the
practice, will the restrictive trade practice be allowed. These “good
results” are detailed in Section 38.
 Monopolistic Trade Practices:
 The MRTP Act provides that where some undertakings are indulging in
monopolistic trade practices, it may refer the matter to the MRTP Commission
for investigation.
 The MRTP Commission is then supposed to make a thorough investigation into
the matter and recommend to the Government what steps should be taken
to discontinue the practice. The Government may make any order which, in
effect, eliminates the monopolistic trade practice.
 The amendment of 1984 gives the Government power to break-up an
undertaking and even acquire the broken-up shares.
 The Amending Act, which seeks to amend the Monopolies and Restrictive
Trade Practices Act, 1969, and the Companies Act, 1956, was brought before
the house in pursuance of the recommendations made by the Sachar
Committee, to plug certain loopholes in the Act which had been pointed out
by the court.
 ‘Unfair Trade Practices’—A new concept introduced by the MRTP
(Amendment) Act, 1984:
Section 36A lists a number of activities, like misleading advertisements
etc., as unfair trade practice, into which the MRTP Commission may
enquire and, if thought fit, pass suitable orders to stop such practice.
The Commission has been given power to issue ‘interim
injunctions’ also, in order to make its orders effective.
 The main objective of the MRTP Act is to protect the interest of the
consumers and small business firms so as to make the economic
environment of the country more healthy. But the Act should not be a
constraint for the growth and diversification of big business.
 The Act attempts to amend monopolies in line with the requirements of
economic growth and social justice — the twin goals of our planning
process. The main criterion for regulating monopolies should be the
ultimate interest of the consumer.
 If the break-up of large houses into small firms results in loss of
efficiency and low quality product, the interest of the consumer is unlikely
to be served. Any anti-monopoly legislation in India should take note of
this reality. An increase in the number of firms is no guarantee of
efficiency.
 MRTP Amendment Ordinance 1991:

 On September 27,1991, the Government amended the MRTP Act,

1969 through a Presidential Ordinance which substantially changed
the entire character of the original Act. The Ordinance removed all
pre-entry restrictions on the setting up of new undertakings and
expansion of the existing ones.
The Main Amendments to MRTP Act:

 1. The Ordinance removes all pre-entry restrictions regarding prior

approval by the Government for new undertakings, expansions,
amalgamations, mergers, takeovers, appointments of Directors and
registration of undertakings, under Section 20 to 26 of the MRTP
Act.
 2. The Government, however, retains the power to direct division of
an undertaking and severance of inter-connection between
undertakings if it is of the opinion that the working of an
undertaking, is prejudicial to the public interest, or has led or is
leading to emergence of any monopolistic or restrictive trade practice.
 3. The outlining restrictions on acquisition or transfer of share, have been reverted
back to the Companies Act, 1956, as Sections 108-A to 108-1. [These sections were
removed from the Companies Act in 1984.]
 4. The Ordinance seeks to enlarge the scope of inquiry by the MRTP Commission to
enable it to take effective steps to curb and regulate unfair business practices. It also
provides for deferent punishment for contravention of the orders passed by the
Commission.
 5. The definition of ‘goods’ has been enlarged by including issue of shares before allotment.
According to the new definition, ‘service’ now covers chit funds and real estate also. This
implies that any monopolistic or restrictive practice in respect of real estate (land) or share
allotments etc., will now come under Monopoly Commission surveillance.

 6. The Government feels that there is no longer any justification for continuing the
exemptions available to Government companies and cooperative societies, especially
in view of the removal of the pre-entry restrictions under the Act. The Act will
accordingly be applicable to Government undertakings and departments also. This
would bring the railways, airlines, electricity boards, banks and financial institutions
under the purview of the MRTP Commission.
 7. However, the Act will not apply to undertakings, which are owned or controlled by
a Government company or the Government, and are engaged in the production of
arms and ammunition and allied items of defence equipment, defence aircraft and
warships, atomic energy, minerals specified in the schedule to the Atomic Energy
(Control of production and use) Order 1953, and industrial units under the currency
and coinage division, Ministry of Finance, Department of Economic Affairs.
 MRTP Amendment Ordinance 1991:
On September 27,1991, the Government amended the MRTP Act,
1969 through a Presidential Ordinance which substantially changed
the entire character of the original Act. The Ordinance removed all
pre-entry restrictions on the setting up of new undertakings and
expansion of the existing ones.
1. The decision to remove the pre-entry restrictions on establishment of new undertakings,
amalgamation and merger are welcome as these would help companies in achieving
economies of scale and enable them to reduce cost of production and become more
competitive in the international markets.
 However, the transfer of provisions (Sections 30A to 30G) as sections 108A to 108 of the
Companies Act, is a retrograde step. Section 30A to 30G place restrictions on the
acquisition and transfer of shares in certain cases.
 These, inter alia, provide for prior approval of the Central Government in respect of even
transfer of shares from the constituent within a ‘group’ to another in the same ‘group’.
 As such, these sections should have been altogether abolished, as transfer of shares within the
group does not lead to any further concentration of economic power of that group, as no
increase on the holding of the group is involved and hence there should be no need for
permission from the Government.
 2. Further in the present context, there is a need for an orderly growth of the capital market
and that shares are freely negotiable and transferable. Such restrictions have also now lost
relevance as foreigners have been allowed to float subsidiaries in India with 51 per cent equity.
 3. There has also been no attempt to amend some of the unrealistic definitions given to
certain relevant terms under the Act like ‘Interconnection’, ‘Dominant Undertakings’,
‘Group’, ‘Assets’, etc. These definitions need to be re-examined and recast in practical
terms if the Act has to be restructured more realistically.
 4. Moreover, the Government still retains its discretionary power to direct division of
an undertaking and severance of inter-connection between undertakings. This seems to
be anachronistic and is not in tune with the liberal thinking envisaged in the New
Industrial Policy, 1991.
THANK-YOU