MRTP ActThe Monopolies and Restrictive Trade Practices Act, 1969, brought into force from 1st June 1970, was a very common controversial piece of legislation.The principal objectives of the MRTP Act, which extends to the whole of India except to the State of Jammu and Kashmir, were:1. Prevention of concentration of economic power to the common detriment, and2. Control of monopolistic, restrictive and unfair trade practices which are prejudicial to public interest.
The MRTP Act sought to prevent the concentration of economic power to the common detriment by preventing those developments which might result in the concentration of economic power such as substantial expansion of existing undertaking; mergers and amalgamations; takeovers; and interconnection of undertakings.The MRTP companies (i.e. dominant undertaking with market share of 25% or more and assets of Rs one crore or more and other undertakings having assets, including that of interconnected undertakings, of Rs. 100 crores or more) had to obtain prior approval of the central government for any of the developments.
The MRTP Act was significantly amended in 1982, 1984, 1985 and 1991.The amendment of 1985 was to raise the asset threshold of undertaking (s) from Rs. 20 Crores to Rs. 100 Crores for applying the provisions of the MRTP Act relating to prevention of concentration of economic power.
1991 ChangesThe Industrial Policy Statement of July 24, 1991, announced very drastic changes in the MRTP Act, viz: Repeal of the provisions of Act pertaining to concentrating of economic power i.e. investment limits, except the provisions empowering the government to defuse concentration of economic power to the common detriment. The provisions of the MRTP Act pertaining to the concentration of economic power were much criticized because of their negative impact on growth and competition.
The interference of the government through the MRTP Act in investment decisions of large companies became deleterious in its effects on Indian industrial growth. The thrust of the MRTP Act in future will be on the control of restrictive and unfair trade practices. The Government, however retains the power to defuse or breakup concentration of economic power to the common detriment. If the central government is of the opinion that the working of an undertaking is prejudicial to the public interest, or has led or is leading, or is likely to lead, to the adoption of any monopolistic or restrictive trade practice, the government is empowered by the MRTP act to direct:
1. The division of any trade of the undertaking by the sale of any part of the undertaking or assets thereof: or2. The division of any undertaking or interconnected undertakings into such number of undertakings as the circumstances of the case may justify.
Control of Monopolistic Trade Practice A monopolistic trade practice is a trade practice which has, or is likely to have, the effect of reasonably preventing or lessening competition in the production, supply or distribution of any goods or services; limiting technical development and capital investment to the common detriment; or allowing the quality of goods or services to deteriorate.
A monopolistic trade practice shall be deemed to be prejudicial to the public interest, if having regard to the economic conditions prevailing in the country, and to all other matters which are relevant in the particular circumstances, the effect of the trade practice is or would be:1. To increase unreasonably the cost relating to the production, supply or distribution of goods or the performance of any service;2. To increase unreasonably: a) The price at which goods are sold, or b) The profits derived from the production, supply pr distribution of any goods (including their sale or purchase) or from the performance of any service:
3. To reduce or limit unreasonably competition in the production, supply or distribution of any goods (including their sale or purchase) or the provision of any service4. To limit or prevent unreasonably the supply of goods to consumers or the provision of any service5. To result in a deterioration in the quality of any goods or in the performance of any service.
1. Section 31 provides that where it appears to the Central Government that the owners of one or more monopolistic undertakings are indulging in any monopolistic trade practice, or that monopolistic trade practices prevail in respect of any goods or services, the government may refer the matter to the MRTP Commission for an inquiry and the commission shall, after such hearing as it thinks fit, report to the Central Government its findings thereon.
2. The Commission may make such an inquiry also on its own motion. If such an inquiry finds that any monopolistic trade practice operates or is likely to operate against the public interest, the Central Government may pass such an inquiry also on its own motion. If such an inquiry finds that any monopolistic trade practice operates or is likely to operate against the public interest, the Central Government may pass such an orders as it may think fit to remedy or prevent any mischiefs which result or may result from such trade practice.
3. Any order made by the Central Government in this regard may include an order: 1. Regulating the production, storage, supply, distribution or control of any goods by the undertaking or the control or supply of any service by it and fixing the terms of sale (including prices) or supply thereof 2. Prohibiting the undertaking from resorting to any act or practice or from pursuing any commercial policy, which prevents or lessens, or is likely to prevent or lessen, competition in the production, supply or distribution of any goods used or produced by the undertaking; 3. Fixing standards for the goods used or produced by the undertaking.
4. Declaring unlawful, except to such extent and in such circumstances as may be provided by or under the order, the making or carrying out of any such agreement as may be specified or described in the order.5. Requiring any party to any such agreement as may be so specified or described to terminate the agreement within such time as may be so specified, either wholly or to such an extent as may be so specified.
Control of Restrictive Trade PracticeA restrictive trade practice is a trade practice which has the effect, actual or probable of restricting, lessening or destroying competition. Such trade practices may tend to obstruct the flow of production or to bring about manipulation of prices or conditions of delivery etc. to the common detriment.The distinction between the two is based, perhaps, on the Monopolies Inquiry Commission, which confined the word “restrictive trade practices” to mean restrictive trade practices other than those pursued by monopolist.
Possible Restrictive Trade Practices1. Concert or Collusion/Cartels2. Price Discrimination3. Predatory Pricing4. Tie-up sales5. Full-line Forcing6. Exclusive Dealing7. Area Restriction8. Resale Price Maintenance
UNFAIR TRADE PRACTICES• MISLEADING ADVERTISEMENT AND FALSE REPRESENTATION• BARGAIN SALE, BAIT AND SWITCH-SELLING• OFFERING OF GIFTS AND PRIZES WITH THE INTENTION OF NOT PROVIDING THEM• PRODUCT SAFETY STANDARDS• HOARDING OR DESTRUCTION OF GOODS• DISPARAGING GOODS, SERVICES OR TRADE OF COMPETITORS 16
APPLICABILITY OF THE MRTP ACT• ALL UNDERTAKINGS ENGAGED IN MANUFACTURE, SUPPLY AND DISTRIBUTION IN THE PRIVATE SECTOR• PUBLIC SECTOR UNDERTAKINGS OWNED BY THE GOVERNMENT OR GOVERNMENT UNDERTAKINGS• STATUTORY CORPORATIONS• UNDERTAKINGS UNDER THE MANAGEMENT OF CONTROLLERS APPOINTED BY LAW• COOPERATIVE SOCIETIES• FINANCIAL INSTITUTIONS, BANKS 17
MRTP COMMISSIONTHE AUTHORITY OF THE COMMISSION INCLUDES THE POWER• TO DIRECT AN UNDERTAKING TO DISCONTINUE A TRADE PRACTICE• TO PASS A CEASE AND DESIST ORDER• TO GRANT TEMPORARY INJUNCTION• TO AWARD COMPENSATION• TO DIRECT PARTIES TO AGREEMENTS TO MODIFY THE SAME• TO DIRECT PARTIES TO ISSUE CORRECTIVE ADVERTISEMENTS• TO RECOMMEND TO CENTRAL GOVERNMENT, DIVISION OF UNDERTAKINGS OR SEVERANCE OF INTER-CONNECTION BETWEEN UNDERTAKINGS 18
MRTP Commission In accordance with the provisions of the Act, the Government of India has set up a Commission known as the Monopolies and Restrictive Trade Commission. The Act provides that the Commission shall consists of a chairman, and not less than two and not more than eight other members, to be appointed by the Central Government. The chairman shall be a person who has the qualification to be a judge of a Supreme Court or of a High Court, and the members thereof shall be persons of ability, integrity and standing, who have adequate knowledge or experience of, or have shown capacity in dealing with problems relating to economics, law, commerce, accountancy, industry, public affairs or
The Act empowers the Central Government toappoint a Director General of Investigation andRegistration, and as many Additional, Joint,Deputy or Assistant Directors-General ofInvestigation and Registration, as it may think fit,to conduct investigations for the purposes of thisAct, and for maintaining a register of agreementssubject to registration under this Act, and forperforming such other functions as are, or may be,provided by, or under this Act.
Jurisdiction and Powers of the Commission The MRTP Commission is vested with powers to inquire into restrictive, monopolistic and unfair trade practices. The commission may inquire into any restrictive trade practice either on the application of the Director General of Investigation or upon a reference made to it by the Central or a State Government, or on receiving complaint from any trade or consumer association having a membership of not less than 25 persons or 25 or more consumers, or upon its own knowledge or information.
For the purpose of an inquiry under this Act, the commission has the same powers as are vested in a Civil Court under the Civil Procedure Code, 1908, in respect of;1. Summoning a witness and his examination on oath;2. Discovery and production of evidence;3. Reception of evidence on affidavits;4. Requisitioning public records from a court or an office; and5. Issuing a commission for the examination of a witness.
INVESTIGATION AND ENQUIRIESACTION CAN BE INITIATED BY:• AN INDIVIDUAL CONSUMER• A REGISTERED ASSOCIATION OF CONSUMERS• A TRADE ASSOCIATION• DIRECTOR GENERAL, INVESTIGATION & REGISTRATION• GOVERNMENT• MRTP COMMISSION SUO MOTTO 23
From MRTP to CompetitionLaw 1991: Widespread economic reforms in India – Aimed at Liberalisation, Privatisation and Globalisation Changes felt necessary in MRTP Act Concentration of economic power to the common detriment and control of monopolies – de-emphasised Pre-entry restrictions (prior approval of government), expanding existing undertaking, M&A‟s, takeovers – deleted from Act 7Up2 Meeting, June 27-28, 2006, Bangkok.
Further Developments 1999: Expert Group on interaction between Trade and Competition Policy recommended new competition law to “promote fair competition and control (eliminate) anti-competitive practices” in the market 2000: GoI High Level Committee on Competition Law and Policy provided a draft Competition law. 2002:The Competition Act legislated 7Up2 Meeting, June 27-28, 2006, Bangkok.
Competition Act 2002 The Ministry of Corporate Affairs, Government of India has issued a has issued a Notification dated 28th August 2009, whereby the most controversial the Monopolies and Restrictive Trade Practices Act, 1969 (“the MRTP Act”) stands repealed and is replaced by the Competition Act, 2002, with effect from September1,2009.
Transitional Provisions MRTP Commissiona) It will continue to exercise jurisdiction and power under the repealed MRTP Act in respect of any case or proceeding filed before 1 September 2009, for a period of two years. It will not, however entertain any new case arising under the MRTP Act on or after 1 September 2009.b) Upon the expiry of the specified two year period, the MRTP Commission shall stand dissolved.
Transfer of pending cases Upon the expiry of two years from 1 September 2009, cases pending before the MRTP Commission will be transferred as follows:- a) Monopolistic or restrictive trade practice cases: All pending cases pertaining to monopolistic or restrictive trade practices, including cases having an element of unfair trade practice, shall stand transferred to the Competition Appellate Tribunal, which shall adjudicate such cases in accordance with the provisions of the repealed MRTP Act.
b) Unfair trade practice cases: All pending cases relating solely to unfair trade practices shall stand transferred to the National Commission as constituted under the Consumer Protection Act, 1986, which may in turn transfer such cases to a State Commission constituted under the said Act under circumstances it deems appropriate. These cases will be dealt with by them in accordance with the provisions of the Consumer Protection Act.
Cases relating to giving false or misleading facts disparaging the goods, services or trade of another person under the MRTP Act: All such pending cases shall be transferred to the Competition Appellate Tribunal which will be dealt in accordance with the provisions of repealed MRTP Act.
Investigations/proceedings undertaken by the Director General under the MRTP Act With effect from 1 September 2009, all pending investigations and proceedings by the Director General relating to:-a) Monopolistic/ restrictive trade practices will be transferred to the Competition Commission of India (CCI), who may conduct such investigations/ proceedings in any manner it deems appropriate.
b) Unfair trade practices will be transferred to the National Commission under the Consumer Protection Act 1986.c) Cases giving false or misleading facts disparaging the goods, services or trade of another person will be transferred to the CCI.
THE COMPETITION ACT, 2002 What and howWHAT?Main Focus areas of the Act : Prohibition of Anti Competitive Agreements Prohibition of Abuse of Dominance Regulation of Combinations Competition AdvocacyHOW?Through establishment of a Competition Commission of India (CCI) and Competition Appellate Tribunal (CAT) 7Up2 Meeting, June 27-28, 2006, Bangkok.
FOCUS AREAS OF 2002 ACT - 1 A. PROHIBITION OF ANTI-COMPETITIVE AGREEMENTS All Anti-competitive agreements are void, i.e., agreements which could restrict competition, vertical or horizontal Rule of Reason to be applied for determining legality of an agreement Certain agreements between same or similar enterprises regarding prices or quantities, on bidding, or to share or divide markets are per se illegal Leniency provision – for whistleblowers in a cartel (if disclosure is before prosecution) 7Up2 Meeting, June 27-28, 2006, Bangkok.
FOCUS AREAS OF 2002 ACT - 1EXCEPTIONS: Export cartels (problem is somewhere else!) Agreements permitted in law Agreements under IPR (not unreasonable restrictions like patent pooling, price-fixing etc.)RULE OF REASON TO BE APPLIED (factors): Creation of entry barriers Driving existing competitors out of the market Accrual of benefits to consumers Improvements in goods and services Increase in Technical development 7Up2 Meeting, June 27-28, 2006, Bangkok.
FOCUS AREAS OF 2002 ACT - 2 B. PROHIBITION OF ABUSE OF DOMINANT POSITION: Mere dominance is not an offence, abuse of dominance is prohibited Important shift from „size‟ / „structure‟ to „behaviour‟ / „conduct‟ Instances of unfair, discriminatory or predatory pricing; restricting quantities, markets or technical development, etc. will qualify 7Up2 Meeting, June 27-28, 2006, Bangkok.
FOCUS AREAS OF 2002 ACT - 3 C. REGULATION OF COMBINATIONS: Includes M&A‟s, Amalgamations, Acquisitions of control - all above a certain high level threshold (Rs.1000 crore aggregate value of assets or Rs.3000 crore turnover of combining parties) Thresholds deliberately high to allow small Indian companies to combine to become active international players Combinations that cause or are likely to cause an adverse effect on competition are under focus (e.g., horizontal mergers between competitors; vertical merger by dominant player with firm in adjacent market, etc.) Pre-notification voluntary 7Up2 Meeting, June 27-28, 2006, Bangkok.
FOCUS AREAS OF 2002 ACT - 4 D. COMPETITION ADVOCACY: CCI to create “culture of competition” Empowered to participate in formulation of country‟s economic policies Create awareness and training on competition issues Establishment of “Competition Fund” for above Recently asked to develop Consultation Paper on National Competition Policy (to harmonise various government policies) 7Up2 Meeting, June 27-28, 2006, Bangkok.
COMPETITION COMMISSIONOF INDIA (CCI) Adjudicative wing distinct from Investigative and Prosecution wing Allows appointment of economists, lawyers, other professionals as investigators (departure from practice of appointing retd. bureaucrats) UTPs removed from the purview of Act and all pending cases transferred to the Consumer Protection Act, 1986 (CPA) Phased introduction of Act – competition advocacy (Y1); Anti-Competitive Practices and Abuse of Dominance (Y2); 7Up2 Meeting, June 27-28, 2006, Combinations (Y3) Bangkok.
COMPETITION APPELLATE TRIBUNAL (CAT) Established after intervention by Supreme Court of India – to retain “judicial powers” within the judicial system CAT to hear and dispose appeals against any direction issued or decision made or order passed by CCI 7Up2 Meeting, June 27-28, 2006, Bangkok.
Competition Act V/S MRTP ACT MRTP Act, 1969 Competition Act, 2002 Based on the pre-reforms scenario Based on the post-reforms scenario Based on size as a factor Based on structure as a factor Competition offences implicit or not Competition offences explicit and defined defined Complex in arrangement and Simple in arrangement and language language and easily comprehensible 14 per se offences negating the 4 per se offences and all the rest principles of natural justice subjected to rule of reason Frowns upon dominance Frowns upon abuse of dominance
MRTP Act, 1969 Competition Act, 2002Registration of agreements No requirements of registration ofcompulsory agreements compulsoryNo combinations regulation Combinations regulated beyond a threshold limitCompetition Commission Competition Commission selectedappointed by the Government by a Collegium (search committee)Very little administrative and Relatively more autonomy for thefinancial autonomy for the Competition CommissionCompetition CommissionNo competition advocacy role for Competition Commission hasthe Competition Commission competition advocacy role
MRTP Act, 1969 Competition Act, 2002No penalties for offences Penalties for offencesReactive and rigid Proactive and fliexibleUnfair trade practices covered Unfair trade practices omitted (consumer fora will deal with them)Does not vest MRTP Commission Competition Law seeks to regulateto inquire into cartels of foreign them.origin in a direct manner.Concept of Group Act had wider Concept has been simplifiedimport and was unworkable