About MRTP Act
After India attained independence in 1947, many new and big firms entered the Indian market. At that time these companies had very little competition and they tried to monopolize the market. The Government of India understood what was happening in the business scenario and to safeguard the rights of consumers the government passed the MRTP bill in 1969.
MRTP full form is Monopolistic and Restrictive Trade Practices and it is an important yet extremely controversial piece of economic legislation. The MRTP bill was passed in 1969 and the MRTP act India came into full force from 1st June 1970. This act has seen many amendments in the subsequent years (1974, 1980, 1982, and 1991). This act is applicable to all the states in India except Jammu and Kashmir.
The MRTP act is no longer active in India as it has been replaced by the Competition Act which came into effect on September 1st, 2009 by the Competition Commission of India.
Here in this article, we will learn about the salient features of the MRTP Act, the objectives of the MRTP Act, what all did this act aim to regulate, and the difference between the MRTP Act and the Competition Act. We have also provided this article in pdf format so that you could download the MRTP act 1969 pdf to refer to it on the go, as and when you need it.
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What is the MRTP Act?
Monopolistic trade practices mean dominant trade practices where a firm or an oligopolistic firm consisting of a set of 3 companies reach a dominant position in the market. They are then able to control the market by eliminating competition or regulating prices and the output of products.
Restrictive trade practices occur by joint action of a group of two or more organizations to avoid market competition, irrespective of market share. Such practices are seen as prejudicial to public interests.
The MRTP act was the first substantial legislation with the goal of regulating free and unfettered trade. This act was geared towards ensuring distinction between restrictive and monopolistic trade practices.
From 1977 the Sachar committee was appointed by the government to ensure mandatory review of the MRTP act. The committee also made sure there were mandatory recommendations for streamlining its activities.
The initial objectives of the MRTP Act are mentioned below:
The law made sure that the economic power does not get concentrated into the hands of a few companies.
To provide for monopolies control
Regulation of monopolistic and restrictive trade practices.
There was an amendment in 1984 that introduced the 4th objective of the act:
Regulation of unfair trade practices.
After the final amendment in 1991, the objectives of the MRTP act stood as described below:
MTP - Prohibition of Monopolistic Trade Practices
RTP - Prohibition of Restrictive trade practices
UTP - Prohibition of Unfair Trade Practices
Elaboration on the Trade Practices that the MRTP Act Regulated
There are three types of trade practices regulated by the MRTP act:
Monopolistic Trade Practices - This refers to the misuse of one’s hold in the market to abuse the market with respect to the production and sale of commodities and services. As part of this practice companies:
eliminated or prevented competition
Took advantage of their monopoly by charging consumers with unreasonably high prices.
Deteriorated the quality of products
Limited technical development
Adopted unfair trade practices
Restrictive Trade Practices - In order to gain power in the market and maximize their profits traders often indulged in activities that blocked the flow of capital into production. These traders also affected supply by bringing in conditions for delivery which in turn gave rise to unjustified costs.
Unfair Trade Practices - Unfair trade practices are comprised of:
A false representation of second-hand goods and new goods.
Misleading representation of the quality of goods, their style, usefulness, need, standard, etc.
False claims or representation on the price of goods and services
False warranties and guarantees on goods and services without performing adequate testing on the product.
False facts are given regarding affiliation, sponsorship, etc.
MRT Commission
To carry out this act, the government established the following:
A commission consisting of a minimum of two and a maximum of eight members.
The chairman of this commission had to be qualified to be a supreme court or high court judge (for a state).
Members of this commission possessed adequate knowledge and experience or have shown capabilities in handling issues related to law, economics, commerce, industry, accounting, or public affairs.
The office period of members of the commission could not exceed 5 years.
During the inquiry before the commission, the DG (Director General of Investigation and Registration) assisted the commission in carrying out the investigation, maintaining a register of agreements, and undertaking carriage of proceedings.
Conclusion
Hopefully, this article has extensively explained the MRTP act India, its features and objectives in a detailed manner.
FAQs on Monopolistic and Restrictive Trade Practices (MRTP) Act
1. What is the full form of the MRTP Act, and what was its main objective?
The full form of the MRTP Act is the Monopolistic and Restrictive Trade Practices Act, 1969. Its primary objective was to prevent the concentration of economic power in the hands of a few, to control monopolies, and to prohibit trade practices that were prejudicial to the public interest.
2. What were the primary goals of the Monopolistic and Restrictive Trade Practices (MRTP) Act, 1969?
The MRTP Act, 1969, was enacted with several key goals to regulate the economic system in India. Its main aims were:
- To ensure that the operation of the economic system does not result in the concentration of economic power to the common detriment.
- To provide for the control of monopolies.
- To prohibit monopolistic, restrictive, and unfair trade practices that harm competition and consumer welfare.
- To regulate mergers, amalgamations, and takeovers of large corporate undertakings.
3. What is the key difference between a 'monopolistic trade practice' and a 'restrictive trade practice'?
A monopolistic trade practice refers to actions by a dominant firm that abuse its market position, such as limiting production, preventing competition, or charging unreasonably high prices. It is about the abuse of a monopoly status. In contrast, a restrictive trade practice refers to any agreement between two or more firms to obstruct the flow of capital or resources into production, or to manipulate prices and conditions of delivery to impose unjustified costs or restrictions on consumers. It is about anti-competitive agreements, regardless of whether the firms are monopolies.
4. Can you provide a real-world example of a restrictive trade practice that the MRTP Act targeted?
A classic example of a restrictive trade practice targeted by the MRTP Act is cartelisation. For instance, if all the major cement companies in a region secretly agreed to sell cement at a fixed, high price rather than competing with each other, it would be a restrictive trade practice. This practice manipulates the market, prevents fair competition, and forces consumers to pay more than they should. The MRTP Act provided a legal framework to investigate and stop such collusive behaviour.
5. Which companies were classified as 'MRTP companies' under the Act?
Under the MRTP Act, large industrial houses were classified as 'MRTP companies'. Initially, this included any company or group of interconnected companies with assets of ₹25 crores or more. These companies were subject to strict regulations and required prior approval from the Central Government for any expansion, merger, or establishment of new undertakings to prevent the further concentration of economic power.
6. Why was the MRTP Act considered essential for the Indian economy when it was introduced in 1969?
The MRTP Act was considered essential in 1969 due to the prevailing socio-economic philosophy of preventing the consolidation of wealth in a few private hands. Post-independence, India adopted a model of a mixed economy with significant state control. The government was concerned that large business houses could grow powerful enough to dominate markets, stifle smaller entrepreneurs, and act against the public interest. The Act was therefore a tool to promote a more equitable and fair economic landscape by curbing monopolistic tendencies.
7. Why was the MRTP Act eventually repealed, and which new legislation replaced it?
The MRTP Act was repealed because it was found to be inadequate for fostering competition in the post-liberalisation era that began in 1991. The focus of economic policy shifted from curbing monopolies to actively promoting competition. The MRTP Act was seen as restrictive and cumbersome for businesses in a globalised environment. Consequently, it was repealed and replaced by the Competition Act, 2002, which came into full effect in 2009. The new act is designed to be more proactive in promoting and sustaining competition in markets.
8. How does the Competition Act, 2002, differ from the old MRTP Act in its core approach?
The core difference in approach lies in their focus. The MRTP Act was primarily concerned with the size of the firm and aimed to curb monopolies, often seeing large size itself as a problem. The Competition Act, 2002, focuses on the behaviour of firms. It does not consider dominance as inherently bad but prohibits the abuse of a dominant position. Key differences include:
- Focus: MRTP Act focused on curbing monopolies; Competition Act focuses on promoting competition.
- Dominance: Under MRTP, dominance was linked to a company's size (assets). Under the Competition Act, it's about a firm's market power and ability to act independently of competitive forces.
- Agreements: The Competition Act explicitly defines and prohibits anti-competitive agreements like cartels, which were not as clearly addressed in the MRTP Act.
- Nature: The MRTP Act was more reformatory, while the Competition Act is punitive, with provisions for imposing heavy penalties for violations.
9. What was the general procedure for handling a complaint under the MRTP Act?
The procedure for a complaint under the MRTP Act involved the MRTP Commission. The typical process was as follows:
- A complaint could be filed by an individual, a consumer association, or the government.
- The Director General (DG) of Investigation and Registration would conduct a preliminary investigation to ascertain the facts.
- If no prima facie case was established, the complaint could be dismissed.
- If the complaint was found to have merit, the Commission would issue a notice to the party in question.
- The Commission had the power to issue a temporary injunction to stop the practice during the inquiry.
- After hearing both sides, a final 'cease and desist' order could be passed, and in some cases, compensation could be awarded to the complainant.
10. Although repealed, are the core principles of the MRTP Act still relevant in India today?
Yes, the foundational principles of the MRTP Act remain highly relevant. While the Act itself has been replaced, its core idea—that unchecked economic power can harm the public interest—is the very bedrock of the modern Competition Act, 2002. The focus has evolved from controlling size to regulating anti-competitive behaviour, but the ultimate goal is the same: to ensure a fair and competitive market that protects consumers and promotes economic efficiency. The principles of preventing cartels, abuse of dominance, and unfair practices are more critical than ever in today's complex economy.
