Epgp 09 10 - mrtp and cci - group 8

Monopolies and Restricted Trade Practices Act and
Competition Act
– Our Understanding –

by

Group 8

Abhishek Pangaria Mandeepak Singh Rajendra Inani
2009 EPGP 001 2009 EPGP 014 2009 EPGP 027
Saravanan Logu Tarandeep Singh Vivek Edlabadkar
2009 EPGP 030 2009 EPGP 037 2009 EPGP 042

EPGP 09-10

Indian Institute of Management, Indore

In partial fulfillment of the requirements for Legal Aspects of Business module of

Executive Post Graduate Program in Management

Instructors- Prof. M R Sreenath & Prof. Lalitha Sreenath

Date: 12th October, 2009

Table of Contents

1 Introduction........................................................................................................................................4
2 Competition and the Need for Regulation..........................................................................................6
3 Need for Law and Authority................................................................................................................7
4 Operative Law – MRTP......................................................................................................................10
Monopolies and Restrictive Trade Practices Act.............................................................................10
Competition Law.............................................................................................................................14
Major Amendments........................................................................................................................16
Monopolies Restricted Trade Practices Act................................................................................16
Competition Act..........................................................................................................................16
5 Constitution of Authority..................................................................................................................17
Monopolies and Restrictive Trade Practices Commission...............................................................17
Competition Commission of India...................................................................................................19
6 Procedure followed by Authority......................................................................................................21
Monopolies and Restrictive Trade Practices Commission...............................................................21
Competition Law.............................................................................................................................22
7 Powers and Duties of Authority........................................................................................................26
Competition Law.............................................................................................................................28
8 Cases and Decisions..........................................................................................................................31
Case I - Maharashtra General Kamgar Union v HLL and TOMCO ...............................................31
Case II - Extra- Territorial Jurisdiction – Case law relating to Float Glass (1998).........................32
Case III - DG. (IR) v. Indian Rayon Corporation Ltd. ....................................................................33
Case IV - CERC v. Karnavati Auto Ltd...........................................................................................33
Case V - DG v. Indian Institute of Management Studies..............................................................33
Case VI - DG. (IR) v. RMP of India ...............................................................................................33
Case VII - Palmolive (India) Limited v. Vicco Laboratories...........................................................34
Case VIII - HMM Ltd. V. Director General MRTPC.......................................................................34
Case IX - Godrej GE Appliances Limited v. Whirlpool of India Limited........................................35
Case X - Devyani Beverages Ltd. v. Coca Cola Ltd. ......................................................................35
Case XI - Hindustan Lever Ltd. and Another v. Colgate Palmolive (India) Limited.......................36
Case XII - Allied Tube & Conduit Co. v. Indian Head, Inc. ...........................................................36
9 Critique of Law..................................................................................................................................38

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Competition Law.............................................................................................................................39
10 Comparative Study.........................................................................................................................40
Historical Information.....................................................................................................................40
US Antitrust Laws............................................................................................................................40
Sherman Antitrust Act................................................................................................................41
The Clayton Act ..........................................................................................................................41
The Federal Trade Commission Act ............................................................................................41
Enforcing Antitrust Statutes........................................................................................................41
Terms Used to Check the Legal Violations..................................................................................42
Horizontal Restraints..................................................................................................................42
Vertical Restraints.......................................................................................................................42
Monopolization...........................................................................................................................43
Price Discrimination....................................................................................................................43
Exclusionary Prices......................................................................................................................43
Mergers.......................................................................................................................................43
Interlocking Directorates............................................................................................................43
Antitrust Exemptions .................................................................................................................44
11 Conclusion......................................................................................................................................45
Differences between MRTP and CL.................................................................................................45
Way Ahead…...................................................................................................................................46
12 References......................................................................................................................................47

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1 Introduction

Since the global economic reforms in early 90’s, there have been large number of
amendments to laws pertaining to companies, customers, licensing, investments etc. One
such law is the Competition Law. Large number of countries have embraced the competition
and unfair trade practices laws along with opening their economies so as to prevent local
industries from foreign players and to promote true competition. In India, many state run
monopolies and other natural monopolies were also subjected to global competition.

The competition laws however are not new to India. In 1969, Monopolies and Restrictive
Trade Practices Act (MRTP Act) was enacted with the objective to restrict concentration of
economic power, control formation of monopolies and prohibit restrictive trade practices that
were likely to have negative effect on consumers. This restraint is necessary in any
industrially developing economy in the interest of the public. This interest was also reflected
in the articles 38 and 39 of the Constitution of India which stated that the State shall ensure
equitable distribution and control of material resources that best serve the needs of the
common man and that the operation of the economic system does not result in
concentration of wealth and means of production to common detriment.

MRTP Act was originally formed only to ensure that companies and with their partners,
dealers or other companies in the same business to not indulge in practices that eventually
lead to monopoly in the market or hurt the public in general. In 1984, unfair trade practices
was also brought under the purview of MRTP Act through an amendment. The act has a
general social policy function (for benefit of public) as well as an economic policy function
(restrict formation of monopoly). In 1991, as a result of economic reforms, the clause
pertaining to prohibition of concentration of wealth was removed.

With the growing face of competition from international players, the Indian companies were
finding it very difficult to expand and advance technologically due to the restrictions imposed
by MRTP Act. Giving heed to this growing concern of Indian industrialists and with a view to
allow formation of large Indian enterprises capable of handling large global players, the
government also removed the pre-scrutiny of investment decisions that was required under
MRTP Act. Further modifications to the act over time have reduced it to just a control
mechanism for restrictive and unfair trade practices.

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With the growing competition and further opening of industrial sectors to foreign
investments, the role of MRTP was increasingly being nullified. In 1999, the Government of
India appointed a high level commission to advice on competition policy and competition law
that could serve the purpose of modern industrial framework either through amendments to
MRTP or through a new law. In May 2000, the committee presented a draft competition law
which after some refinements was passed by the government as Competition Act in 2002.

On 1st September 2009, the government decided to enact competition law by appointing
chairman and five members for the Competition Commission of India and through one
competition law’s sections (66), communicated that MRTPC will cease to exist by 31st
August 2011.

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2 Competition and the Need for Regulation

Competition, ever since barter system, has been considered to be economically beneficial
for the consumers and for the development of the nation as a whole. Competition inherently
offers two benefits:
1. Stimulated innovation and efficiency
2. Provides consumers with alternatives that help in better fulfillment of demand

In a free trade environment or truly competitive market, the companies compete against
each other for a share of consumer’s wealth. The prices adjust to demand and supply of the
products and neither consumer nor producer can control the price of the product. This ideal
scenario however is almost impossible to replicate in real world. Free market in a real world,
in the absence any regulations has far reaching negative implications. Big companies can
easily eliminate existing smaller competitors by forcing them out of market through price
wars and also restrict on similar lines the entry of new competition. A monopoly can be
achieved in three ways:
1. Forcing the competition out of market
2. Takeover of competition
3. Cartelization

Once monopoly is attained, the company can exercise control over the prices of the goods
that it produces there by eroding public wealth. The monopolistic market does not promote
innovation and the consumer preferences are not adhered to. Hence, in order to ensure that
a free and competitive market exists, there is a need to restrict the above mentioned abuses
of market power. This forms the basis of all competitive laws across nations.

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3 Need for Law and Authority

Competition laws across nations essentially control three different activities.
1. Anti Competitive Agreements
2. Abuse of Dominance
3. Anti Competitive Mergers

Anti Competitive Agreements are agreements between two companies in the same or
related domain of operations. These agreements tend to provide collective benefit to the
parties in the agreement either by segregating geographies, pooling resources etc. thereby
causing losses to other companies in the same competitive arena.

Cartel – A cartel is an agreement between companies in the same area of operation. The

agreement tends to fix price in the market, split the market geographically between the
agreeing parties, govern total cumulative production or rig bids. As the details above would
suggest, it is one of the most dreaded forms of operation that kills competition. Cartels are
normally difficult to identify as all inclusive parties tend to cover up such acts vehemently.
The role of investigative agencies in such cases is required to be extraordinary. Some
countries like USA have very stringent laws against formation of cartel. The Sherman Act
prohibits formation of cartel even if such a formation is not causing harm to any other party.
The agencies in US are allowed to record conversations, meetings, unofficial documents and
even support the whistle blowers. One of the biggest and open to market cartel is OPEC
which controls the price and production of petroleum products across the globe.

Non-Cartel Horizontal Agreements – These agreements unlike regular horizontal

agreements do not require the parties to have some restraint on commercial conduct. These
are largely focused on achieving efficiency, e.g. research and development, trade
associations. The law does not explicitly prohibit such formations and cases under these are
examined under “rule of reason”. There is a possibility of organizations coming up with a
price control mechanism through the association they belong to or within a group of such
associations. This is anti-competition and can be challenged in the court of law. As there is a
very thin line between co-operation aspect of associations and cartel formation, the
associations are required to be very cautious when coming up with a common statement.

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Some countries however allow formation of such cartels for expanding businesses overseas
but ensure that in-turn they do not impact the domestic market.

Vertical Agreements – Vertical agreements essentially are between companies that have

complementary products of markets. Such agreements are beneficial as they provide a
common point of control across categories. There agreements are mostly seen in cases
where atleast one of the parties involved is significantly dominant in the market. In India,
before economic reforms, this was the case when a gas burner was required to be
purchased with a gas connection. This was a government policy which did not allow the
consumer to exercise other options available in market. Actually there were no options
available in the market as well. Another example of this type of vertical arrangement is that
of Microsoft, a dominant player in PC software market exercises control over the hardware
manufactures to supply its bundled packages along with hardware. Another type of vertical
agreement is where a company exercises control over another through the exclusivity
constraint. For e.g. an agreement between a retailer and a distributor/supplier where the
distributor/supplier is prohibited from procuring/producing for any company other than the
retailer.

Block Exemptions – Some nations exempt a particular segment of industry from the anti-

competitive agreements. This is essentially done to conserve resources within or across
group of nations. For e.g. the European Commission has allowed formation of blocks for
technology transfer, research and development etc.

Abuse of Dominance essentially means that the company exploits its control over the
market by behaving independent of the consumers of the competition. Controlling both of
these factors is essential to allow for a fairer market scenario.

Exploitative Abuse – When a dominant enterprise exercising the control over the market

exploits consumers through higher prices or lower quality products, it is called exploitative
abuse. This was very explicitly noticed during the license raj in India when the companies
with license for a particular product exercised means to exploit consumer by supplying
inferior quality goods at higher rates.

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Exclusionary Abuse – When a dominant enterprise does not allow the entry or maturation of

competition through price wars or other unfair means, it is called exclusionary abuse.
Exclusionary abuse can also be exercised through formation of cartels as described earlier
of through mergers as described henceforth.

The two abuses mentioned above are effected only in a relevant market through dominant
control. The relevant market is represented by two elements, the product and the
geography. Normally, the laws pertinent in a state only tend to control the dominance in that
state. However there may be international laws that may look at controlling this globally.

Merger essentially means the amalgamation of two or more companies, normally, in similar
or complementary businesses. Mergers essentially provide the companies with a better
future prospect in terms of garnering the economies of scale or providing access to
divergent or relevant consumer segments. However, when two companies, both, in
dominant position come together through a merger, it creates an enterprise of such a
massive proportion that it can dominate the entire market segment. This dominance leads to
abuse as mentioned above. In order to curb these types of initiatives, mergers have to be
approved by competition law committee in most countries. For e.g. when Staples and Office
Depot in US filed a petition for merger, it was rejected by the US court as they observed that
both the companies were in the same market segment and their merger would mean that
one company would have control of over 80% of the market segment, thereby killing
competition and leading to higher prices.

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4 Operative Law – MRTP

Monopolies and Restrictive Trade Practices Act

PART A - Registration of Agreements Relating to Restrictive Trade Practices

Registrable agreements relating to restrictive trade practices

1. Every agreement failing within one or more of the following categories shall be deemed,
for the Purposes of this Act, to be an agreement relating to restrictive trade practices and
shall be subject to registration in accordance with the provisions of this
Chapter namely:

a. Any agreement which restricts, or is likely to restrict, by any method the persons
or classes of persons to whom goods are sold or from whom goods are bought;
b. Any agreement requiring a purchaser of goods, as a condition of such purchase,
to purchase some other goods;
c. Any agreement restricting in any manner the purchaser in the course of his trade
from acquiring or otherwise dealing in any goods other than those of the seller or
any other person;
d. Any agreement to purchase or sell goods or to tender for the sale or purchase of
goods only at prices or on terms or conditions agreed upon between the sellers
or purchasers;
e. Any agreement to grant or allow concessions or benefits, including allowances,
discount, rebates or credit in connection with, or by reason of, dealings ;
f. Any agreement to sell goods on condition that the prices to be charged on re-sale
by the purchaser shall be the prices stipulated by the seller unless it is clearly
stated that prices lower than those prices may be charged;
g. Any agreement to limit, restrict or withhold the output or supply of any goods or
allocate any area or market for the disposal of the goods;
h. Any agreement not to employ or restrict the employment of any method,
machinery or process in the manufacture of goods;
i. Any agreement for the exclusion from any trade association of any person
carrying on or intending to carry on, in good faith the trade in relation to which the
trade association is formed;
j. Any agreement to sell goods at such prices as would have the effect of
eliminating competition or a competitor;

MRTP & CCI P a g e | 10

i. Any agreement restricting in any manner, the class or number of whole-
sellers, producers or suppliers from whom any goods may be bought;
ii. Any agreement as to the bids which any of the parties thereto may offer at
an auction for the sale of goods or any agreement whereby any party
thereto agrees to abstain from bidding at any auction for the sale of goods
k. Any agreement not hereinbefore referred to in this section which the Central
Government may, 1[by notification] specify for the time being as being one
relating to restrictive trade practice within the meaning of this sub-section
pursuant to any recommendation made by the Commission in this behalf;
l. Any agreement to enforce the carrying out of any such agreement as is referred
to in this sub-section.
2. The provisions of this section shall apply, so far as may be, in relation to agreements
making provision for services as they apply in relation to agreements connected with the
[production storage supply] distribution or control of goods.
3. No agreement falling within this section shall be subject to registration in accordance
with the provisions of this Chapter if it is expressly authorized by or under any law for the
time being in force or has the approval of the Central Government or if the Government
is a party to such agreement.

PART B - Unfair Trade Practices

Definition of unfair trade practice - In this Part, unless the context otherwise requires, "unfair
trade practice", means a trade practice which, for the purpose of promoting the sale, use or
supply of any goods or for the provision of any services, [adopts any unfair method or unfair
or deceptive practice including any of the following practices,] namely:-

1. The practice of making any statement, whether orally or writing or by visible
representation which,-

a. Falsely represents that the goods are of a particular standard, quality, 4[quantity,]
grade, composition, style, or model;
b. Falsely represents that the services are of a particular standard, quality or grade;
c. Falsely represents any re-built, second-hand, renovated, reconditioned or old
goods as new goods;
d. Represents that the goods or services have sponsorship, approval,. performance,
characteristics, accessories, uses or benefits which such goods or services do
not have;


e. Represents that the seller or the supplier hag a sponsorship or approval or
affiliation which such seller or supplier does not have;
f. Makes a false or misleading representation concerning the need for, or the
usefulness of, any good, or services;
g. Gives to the public any Warranty or guarantee of the performance, efficacy or
length of life of a product or of any goods that is not based on an adequate or
proper test thereof: Provided that where a defense is raised to the effect that
such warranty or guarantee is based on adequate or proper test, the burden of
proof of such defense shall lie on the person raising such defense;
h. Makes to the public a representation in a form that purports to be-
i. a warranty or guarantee of a product or of any goods or services; or
ii. a promise to replace, maintain or repair an article or any part thereof or to
repeat or continue a service until it has achieved a specified result, if such
purported warranty or guarantee or promise is materially misleading or it there
is no reasonable respect that such warranty, guarantee or promise will be
carried out;

2. Materially misleads the public concerning the price at which a product or like
products or goods or services, have been, or are, ordinarily sold or provided, and, for
this purpose, a representation as to price shall be deemed to refer to the price at
which the product or goods or services has or have been sold by sellers or provided
by suppliers generally in the relevant market unless it is clearly specified to be the
price at which the product has been sold or services have been provided by the
person by whom or on whose behalf the representation is made;
3. Gives false or misleading facts disparaging the goods, services or trade of another
person.
4. Permits the publication of any advertisement whether in any newspaper or otherwise,
for the sale or supply at a bargain price, of goods or services that are not intended to
be offered for sale or supply at the bargain price, or for a period that is, and in
quantities that are reasonable, having regard to the nature of the market in which the
business is carried on, the nature and of the advertisement.
5. Permits
a. the offering of gifts, prizes or other items with the intention of not providing
them as offered or creating the impression that something is being given or
offered free of charge when it is fully or partly covered by the amount charged
in the transaction as a whole,


b. The conduct of any contest, lottery, game of chance or skill, for the purpose of
promoting, directly or indirectly the same, use or supply of any product or any
business interest;
6. Permits the sale or supply of goods intended to be used or are of a kind likely to be
used, by consumers, knowing or having reason to believe that the goods do not
comply with the Standards prescribed by competent, authority relating to
performance, composition, contents, design, constructions, finishing or packaging as
are necessary to prevent or reduce the risk of, injury to the person using the goods;
7. Permits the hoarding or destruction of goods, or refuses to sell the goods or to, make
them available for sale, or to provide, any service, if such hoarding or destruction or
refusal raises or tends to raise or is intended to raise, the cost of those or other
similar goods services.

Implications of MRTP Law

Holding of contests and schemes

There are relevant provisions of holding contests and games are in Section 36A. In this
“Unfair Trade Practices” is a trade practice where a practice of promoting the sale, use or
supply of any goods or provision of any services adopts any unfair methods or deceptive
methods like offering some gifts not intended to provide them as intended or creating the
impression something is totally offered free of charge where as its covered in the amount
charged in the scheme.

Disparaging Products of Competitors

In a competitive economy, every representation of product or service is about what others
are not, this makes comparative advertisement or representation worth discussing. The
provision on comparative advertisement is in Sec 36 A. It says The practice of making any
statement whether orally or in writing or by visible representation which gives false or
misleading facts, hence disparaging the goods, service or trade of another person.

Correctness of representation

Even though representation is qualified above to be a case of disparaging others goods,
representation by its own is not a unfair trade practice. It becomes so only if its use of
misleading and false facts. Therefore in cases where the first criterion of disparagement has
been established, it still needs to be established that the facts in the representation are false
or misleading to prove a case of violation.


A concern remains of how the rival party will be compensated in case of above. This
involves the assessment of actual loss the party has faced due to the act of rival party.

A key issue in such cases for the rival parties becomes, whether there would be an interim
injunction or not. The legal practice underlying the granting of an interim injunction is based
on the principle of balance of convenience. So can it be ascertained quick enough and the
advertisement and campaign should be stopped. Also if the claim made in advertisement
turns out to be untrue whether the consumers can be compensated.

Competition Law
The Competition Act, 2002

Prohibition of agreements
Anti-competitive agreements –
1. No enterprise or association of enterprises or person or association of persons shall
enter into any agreement in respect of production, supply, distribution, storage,
acquisition or control of goods or provision of services, which causes or is likely to cause
an appreciable adverse effect on competition within India.
2. Any agreement entered into in contravention of the provisions contained in sub-section
(1) shall be void.
3. Any agreement entered into between enterprises or associations of enterprises or
persons or associations of persons or between any person and enterprise or practice
carried on, or decision taken by, any association of enterprises or association of pe sons,
including cartels, engaged in identical or similar trade of goods or provision of services,
which
a. Directly or indirectly determines purchase or sale prices;
b. Limits or controls production, supply, markets, technical development, investment or
provision of services;
c. Shares the market or source of production or provision of services by way of
allocation of geographical area of market, or type of goods or services, or number of
customers in the market or any other similar way;
d. Directly or indirectly results in bid rigging or collusive bidding, shall be presumed to
have an appreciable adverse effect on competition: Provided that nothing contained
in this sub-section shall apply to any agreement entered into by way of joint ventures
if such agreement increases efficiency in production, supply, distribution, storage,
acquisition or control of goods or provision of services.


Explanation.-For the purposes of this sub-section, "bid rigging" means any
agreement, between enterprises or persons referred to in sub-section (3) engaged
in identical or similar production or trading of goods or provision of services, which
has the effect of eliminating or reducing competition for bids or adversely affecting
or manipulating the process for bidding.

4. Any agreement amongst enterprises or persons at different stages or levels of the
production chain in different markets, in respect of production, supply, distribution,
storage, sale or price of, or trade in goods or provision of services

Abuse of dominant position

1. No enterprise shall abuse its dominant position.

2. There shall be an abuse of dominant position under sub-section (1), if an enterprise,-

a. Directly or indirectly, imposes unfair or discriminatory-
i. Condition in purchase or sale of goods or service; or
ii. Price in purchase or sale (including predatory price) of goods or service.
b. Limits or restricts-
i. Production of goods or provision of services or market therefore; or
ii. Technical or scientific development relating to goods or services to the
prejudice of consumers; or
iii. Indulges in practice or practices resulting in denial of market access; or
iv. Makes conclusion of contracts subject to acceptance by other parties of
supplementary obligations which, by their nature or according to commercial
usage, have no connection with the subject of such contracts; or
v. Uses its dominant position in one relevant market to enter into, or protect,
other relevant market.

Regulation of combinations

1. No person or enterprise shall enter into a combination which causes or is likely to cause
an appreciable adverse effect on competition within the relevant market in India and
such a combination shall be void.
2. Subject to the provisions contained in sub-section (1), any person or enterprise, who or
which proposes to enter into a combination, may, at his or its option, give notice to the


Commission, in the form as may be specified, and the fee which may be determined, by
regulations, disclosing the details of the proposed combination, within seven days of-
a. Approval of the proposal relating to merger or amalgamation, referred to in clause
(c) of section 5, by the board of directors of the enterprises concerned with such
merger or amalgamation, as the case may be;
b. Execution of any agreement or other document for acquisition referred to in
clause (a) of section 5 or acquiring of control referred to in clause (b) of that
section.
3. The Commission shall, after receipt of notice under sub-section (2), deal with such notice
in accordance with the provisions contained in sections 29, 30 and 31.
4. The provisions of this section shall not apply to share subscription or financing facility or
any acquisition, by a public financial institution, foreign institutional investor, bank or
venture capital fund, pursuant to any covenant of a loan agreement or investment
agreement.
5. The public financial institution, foreign institutional investor, bank or venture capital fund,
referred to in sub-section (4), shall, within seven days from the date of the acquisition,
file, in the form as may be specified by regulations, with the omission of the details of the
acquisition including the details of control, the circumstances for exercise of such control
and the consequences of default arising out of such loan agreement or investment
agreement, as the case may be.

Major Amendments

During the course of time each law goes through changes because of the changes in the
environment around it and also to plug loopholes. Here is a snapshot of what major
amendments happened in case of MRTP Act and Competition Act.

Monopolies Restricted Trade Practices Act

On 28th December, 1991, the MRTP (Amendment) Act was passed in the parliament. The
law was modified primarily to coordinate with the economic reforms that were being
undertaken. Most of the amendments related to allowing companies to achieve economies
of scale, gain competitive advantage against international companies and making them
strong enough to compete in the international market.

Competition Act

The competition Act, 2002, was amended by The Competition (Amendment) Act, 2007,
which came into effect from October 12, 2007. The highlight of this amendment was the
“Establishment of Competition Appellate Tribunal”.


5 Constitution of Authority

Monopolies and Restrictive Trade Practices Commission
In 1960, Monopolies Inquiry Commission (MIC) was formed under Commissions of Inquiry
Act (1952) to enquire into the extent and effect of concentration of economic power due to
the prevalence of monopolistic and restrictive practices followed by private organizations and
to suggest legislation necessary to counter the above. The purview of the study for MIC was
restricted to a few industrial sectors and it was directed not to study public and agriculture
sector. Public sector was believed to be functioning in benefit of the people of India without
regard to its monopolistic nature.

In 1965, MIC submitted its report to Government of India. The report consisted of both,
legislative as well as non-legislative recommendations. The MIC recommended setting up of
public sector enterprises in sectors where monopolies existed from private companies. It
also suggested that SME’s and co-operative be setup and preference be given to them in
terms of financing and other benefits to counter the private monopoly. The MIC also
recommended that an independent commission be formed with a judge as its head. The
commission was proposed to have investigation arm to detect restrictive practices. It was
also proposed to have punitive powers but not the power to order civil imprisonment.

However, when the MRTP Bill was passed in the parliament, it had several deviations from
the recommendations of MIC. All private enterprises with assets of Rs. 20 crores and all
dominant enterprises with assets of Rs. 1 crore or more were required to seek approval from
the central government for expansion or setting up new business. It also provided civil court
powers limited to enforcing presence of witnesses and calling for documents to the MRTP
Commission (MRTPC) and not to the investigating agency. The trial of offences was left to
the courts and the commission was restricted just to giving cease or desist orders to the
companies found guilty.

Organization of the Committee
The commission consisted of a chairman and at least two or at max eight other members. All
of them were appointed by the Central Government. Following rules applied in selection of
the members of the commission.


1. The chairman was required to be a present or retired judge of the Supreme Court or high
court.
2. Members other than the chairman were selected based on their knowledge in areas such
as economics, law, commerce, accountancy, industry, public affairs and administration.
3. The members were also expected not to have any financial or other interest that would
likely affect his functions as a member.
4. A member can hold the office for a maximum five years after which he may be appointed
for another term.
5. Total service of a member at the commission was not to exceed 10 years or 65 years of
age whichever is earlier.
6. The member could resign from the services by sending a letter to the Central
Government.
7. The member could also be removed from the commission if:
a. Has been adjudged insolvent.
b. Has been convicted in an offence.
c. Has become physically or mentally incapable of executing responsibilities of a
member.
d. Has acquired financial or other interests that are likely to affect his functions as a
member.
e. Has been found guilty of abusing his position as a member.
8. In case the chairman resigns, is removed or is incapable of handling the responsibilities
for some duration of time, the most senior member in terms of years of service to
MRTPC will work as an acting chairman till a new chairman is appointed by the Central
Government.
9. The remuneration and allowances of chairman and members shall be governed by the
conditions of service.
10. In case of a difference of opinion between the members of the commission, the majority
view shall prevail and become the order.
11. The chairman and all members shall take oath of secrecy before commencing the work
as a member.
12. Chairman or any member cannot hold any office in an industry under the purview of the
act for a period of five years from the date on which he ceases to hold the office at the
commission.
13. The Central Government can appoint Director General and as many Additional, Joint,
Deputy or Assistant Deputy Generals of Investigation and Registration as it deems fit for
making investigation fast.


14. The Director General may appoint any one his subordinates to function as the registrar
of agreements.
15. Every person, as mentioned in point 13, shall exercise his powers and discharge
functions subject to general control, supervision and direction of Director General.
16. The salaries and compensation to all members and all expenses of the commission shall
be defrayed out of Consolidated Funds of India.

Competition Commission of India
The new competition law i.e. Competition Act (2002) was enacted in January 2003. As per
the act, the Competition Committee of India (CCI) was formed with a Chairman and a
member in October 2003. A writ petition filed in Supreme Court was disposed in January
2005 and the amended bill was passed in the parliament recently. However, during this
period some work has been carried out by the CCI despite constraint on resources and
finances. The section of the Competition Law which brings to an end the MRTPC was
activated on September 1, 2009.

Composition of Commission
1. The CCI is composed of a Chairperson and a minimum of two and a maximum of six
members, all of whom are to be appointed by the Central Government. The Chairperson
and every other Member must professional experience of not less than fifteen years in,
international trade, economics, business, commerce, law, finance, accountancy,
management, industry, public affairs or competition matters, including competition law
and policy, will be useful to the Commission.
2. The Chairperson and other Members are whole-time Members. They are selected by a
selection committee consisting of:
a. the Chief Justice of India or his nominee ---- Chairperson;
b. the Secretary in the Ministry of Corporate Affairs ---- Member;
c. the Secretary in the Ministry of Law and Justice ---- Member;
d. two experts of repute who have special knowledge ---- Members.
3. Term of the Chairperson and other members: 5 years from the date person takes upon
office.
4. The Chairperson has the powers of general superintendence, direction and control in
respect of all administrative matters of the Commission.
5. Appointment of Director General:
The Central Government may, by notification, appoint a Director General for the
purposes of assisting the Commission in conducting inquiry into contravention of any of


the provisions of this Act and for performing other functions provided by or under this
Act.
6. The Director General and Additional, Joint, Deputy and Assistant Directors General or
shall be appointed from amongst persons of integrity and outstanding ability.


6 Procedure followed by Authority

Monopolies and Restrictive Trade Practices Commission
The MRTPC can be approached in one of the following ways:
• Application filed by a consumer, association of consumers or trade association.
• Application by Director General of Investigation and Registration
• Reference from Central or State Governments
• Self initiated action by the Commission

The process followed by the authority to dispose the cases is as follows:
1. Once the complaint is received under Restrictive Trade Practices (RTP) or under Unfair
Trade Practices (UTP), the DG is asked to conduct investigation and submit a
preliminary investigation report (PIR). This order to conduct investigation is considered to
be the commencement of enquiry under the act.
2. The investigative team may then ask the complainant to submit required set of
documents and to assist the team in moving forward with the case. A notice may be
served to the organization against which the case is registered and further
data/documents can be asked for from the organization.
3. Once the PIR is submitted by the DG to the commission, the commission in accordance
with the MRTP Act, can either drop the case (in case of lack of prima-facie evidence) or
send it back to DG for further investigation (in case some merit is observed in the case).
4. During this action, the DG may be asked to respond to some rebutting queries of
complainant of the organization under question.
5. Before beginning the next round of investigations, it is required that DG share the PIR
with both the complainant as well as the company under investigation.
6. The secretary, in view of the application will issue a notice to both the parties. This notice
is also required to be published in press.
7. Representations are required to be submitted by both opposing and supporting parties
within 30 days of the release of public notice.
8. After the expiry of the above time period, the commission shall fix a date for preliminary
hearing. The complainant shall state his case before the commission
indicating/referencing his submissions to the commission. He shall be given all the
copies of representations received in response to the public notice and shall be asked to
submit a response in 14 days.


9. If during this time the commission observes that this case is similar to a case in past or
an ongoing case, they can be grouped together.
10. Further hearings and notices may be required on a case to case basis.
11. Also, in case any assistance is required, e.g. for technical or statistical issues, the
commission can take assistance from the Central Government.
12. Final hearing takes place when the commission is ready with the details on facts and its
analysis. This may be open to public or closed based on sensitivity of data under
observation. In this hearing, the commission will pass final orders on the complaint,
application, reference etc. A copy of this order is sent to competent authorities.
13. The orders may be reviewed at a later date but only by providing opportunity to both the
person in whose favor the decision was made and the DG.
14. In an event of an appeal in Supreme Court of the High Court, the DG will represent the
commission except in cases where the DG himself has files the case.

Competition Law

Procedure for inquiry:
1. Once the commission receives a reference from a concern party and if the Commission
is of the opinion that there exists a case, it directs the Director General to investigate into
the matter.
2. Once the commission receives a reference from a concern party and if the Commission
is of the opinion that there exists no case, it closes the matter and sends the order and or
report to the concerned parties.
3. Director General must analyze and send the report to the Commission within a stipulated
time. The Commission may forward the copy of the report to concerned party.
4. If the Director General recommends that there is no contravention of the provisions of
this Act, the Commission shall invite objections or suggestions from the concerned party.
5. If, after consideration of the objections and suggestions by the Director General the
Commission agrees with the recommendation of the Director General, it closes the
matter forthwith and passes orders as it deems fit and communicate its order to the
concerned party.
6. On the other hand, after consideration of the objections or suggestions by the Director
General if the Commission is of the opinion that further investigations is required, it may
direct further investigation in the matter by the Director General or call for further inquiriy
by itself or proceed with further inquiry in the matter in accordance with the provisions of
this Act.


7. If the report of the Director General recommends that there is contravention of any of the
provisions of this Act, and the Commission is of the opinion that further inquiry is called
for, it shall inquire into such contravention in accordance with the provisions of this Act.

Orders by Commission after inquiry into agreements or abuse of dominant position

1. The Commission directs the party involved in an agreement not according to this law, or
abuse of dominant position, to discontinue and not to re-enter such agreement or
discontinue such abuse of dominant position, as the case may be.
2. It imposes penalty not more than ten per cent of the average of the turnover for the last
three preceding financial years.

Division of enterprise enjoying dominant position

1. The Commission directs division of an enterprise enjoying dominant position to ensure
that such enterprise does not abuse its dominant position.
2. Notwithstanding anything contained in any other law for the time being in force or in any
contract or in any memorandum or articles of association, an officer of a company who
ceases to hold office as such in consequence of the division of an enterprise shall not be
entitled to claim any compensation for such cesser.

Procedure for investigation of combination

1. Where the Commission is of the opinion that a combination is likely to cause, or has
caused an appreciable adverse effect on competition within the relevant market in India,
it shall issue a notice to show cause to the parties to combination calling upon them to
respond within thirty days of the receipt of the notice, as to why investigation in respect
of such combination should not be conducted. After receipt of the response of the parties
to the combination, the Commission may call for a report from the Director General.
2. The Commission, if it is prima facie of the opinion that the combination has, or is likely to
have, an appreciable adverse effect on competition, it shall, within seven working days
from the date of receipt of the response of the parties to the combination, or the receipt
of the report from Director General, whichever is later directs the parties to publish
details of the combination within ten working days, for bringing the combination to the
knowledge or information of the public and persons affected or likely to be affected by
such combination.
3. The Commission may invite any person or member of the public, affected or likely to be
affected by the said combination, to file his written objections, if any, before the


Commission within fifteen working days from the date on which the details of the
combination were published.
4. The Commission may, within fifteen working days from the expiry of the period specified
in sub-section (3), call for such additional or other information as it may deem fit from the
parties to the said combination.
5. The additional or other information called for by the Commission shall be furnished by
the parties within fifteen days from the expiry of the period specified in sub-section (4).
6. After receipt of all information and within a period of forty-five working days from the
expiry of the period specified in sub-section (5), the Commission shall proceed to pass
the orders on the case.

Orders of Commission on certain combinations

1. The Commission approves the combination that is found not to have an appreciable
adverse effect on competition.
2. If the Commission finds that the combination is likely to have an appreciable adverse
effect on competition, it directs that the combination shall not take effect.
3. If the Commission finds that the combination is likely to have, an appreciable adverse
effect on competition but such adverse effect can be eliminated by suitable modification,
it proposes appropriate modification to the combination, to the parties to such
combination. The commission specifies the time period and failure to do so will entitle
penalty in accordance with the provisions of this law.
4. If the parties to the combination do not accept the modification proposed by the
Commission, such parties must, within thirty working days, submit amendment to the
modification. If the Commission agrees with the amendment submitted by the parties, it
shall, by order, approve the combination.
5. If the Commission does not accept the amendment, the parties are allowed a further
period of thirty working days within which such parties shall accept the modification
proposed by the Commission.
6. If the parties fail to accept the modification within thirty working days, the combination
shall be deemed to have an appreciable adverse effect on competition and be dealt with
in accordance with the provisions of this Act.
7. If the Commission does not pass an order or issue direction on the expiry of a period of
two hundred and ten days from the date of notice given to the Commission, the
combination is deemed to have been approved by the Commission.


8. Where any extension of time is sought by the parties to the combination, the period of
ninety working days shall be reckoned after deducting the extended time granted at the
request of the parties.
9. Where the Commission has ordered a combination to be void, the acquisition or
acquiring of control or merger or amalgamation referred to in section 5, shall be dealt
with by the authorities under any other law for the time being in force as if such
acquisition or acquiring of control or merger or amalgamation had not taken place and
the parties to the combination shall be dealt with accordingly.

Competition advocacy
1. While formulating a policy on competition, the Central Government and State
Government must make a reference to the Commission for its opinion on possible effect
of such policy on competition. The Commission has to give its opinion within sixty days
after receipt of such reference.
2. The opinion given by the Commission shall not be binding upon the Central Government
[or the State Government, as the case may be] in formulating such policy.
3. The Commission shall take suitable measures for the promotion of competition
advocacy, creating awareness and imparting training about competition issues.

Competition Appellate Tribunal
In the “Competition (Amendment) Act, 2007” Competition Appellate Tribunal was created –
• To hear and dispose of appeals against the Commission;
• To adjudicate on claim for compensation that may arise from the findings of the

Commission or the orders of the Appellate Tribunal in an appeal.
1. The Appellate Tribunal shall consist of a Chairperson and not more than two other
members to be appointed by the Central Government.
2. Appeal to Appellate Tribunal shall be filed within a period of sixty days from the date on
which a copy of the direction or decision or order made by the Commission is received
by the aggrieved party.
3. On receipt of an appeal, the Appellate Tribunal passes such orders as, confirming,
modifying or setting aside the direction, decision or order appealed against.
4. Every proceedings before the Appellate Tribunal shall be deemed to be a judicial
proceeding.
5. Any party including the Commission, aggrieved by any decision of the Appellate Tribunal
may file an appeal to the Supreme Court within sixty days.


7 Powers and Duties of Authority


Under the MRTP Act, a commission has been established; the Chairman is required to be a
person who is qualified to be a judge of the High Court or Supreme Court. The members of
the commission are persons with high ability, integrity and adequate knowledge related to
economics, commerce, public affairs and accountancy. The commission is assisted by
Director General of Investigation and Registration.
1. For any inquiry made to the commission under the MRTP Act, the commission has the
same powers as vested in a civil court under the Civil Court procedure. The commission
has powers with respect to matters namely –
a. Summoning and enforcing the attendance of any witness and examining him on
oath
b. Discovery and production of a document or any material object
c. Reception of evidence on affidavit
d. Requisitioning of any public record from any court or office
e. Issuing of any commission for the examination of the witness
2. The proceedings before the court shall be deemed to be judicial proceeding. The
commission shall be deemed to be a civil court for the purpose of Section 195
3. The commission shall have the power to enquire
a. To produce before and allow to be examined by the officer of the commission
b. To furnish before the officer, information related to trade practice as may be
required for the purpose of the Act. Any other information in his/her possession in
relation to trade needs to be submitted
4. The attendance of the witness shall be limited to the local limits of the Commission’s
jurisdiction.
5. The commission has the power to grant temporary injunctions i.e. individual is restrained
from carrying on any monopolistic or restrictive or unfair trade practice until the
conclusion of the enquiry.
6. The commission has the power to award compensation.
a. Compensation may be result of any monopolistic or restrictive or unfair trade
practice carried by an undertaking or any person causes a loss or damage to the
Central Government or any State Government or any trader or any consumer.
The Government or the trader or consumer can file a law suit. The commission
will, after taking into account the allegations made in the application –


i. Make an order directing the owner of the undertaking or any other person
to make the payment
7. The commission has power to investigate to find out whether or not orders made by it
have been complied with –
a. The Director General or any officer under the commission is authorized to make
investigations and exercise all the powers given to the Director General, in case
the commission has reasonable cause to believe that the person has omitted or
failed to comply with order made by it under the Act .
b. Once the investigation is concluded, the Director General or any authorized
officer will submit his report to the commission. This will enable the commission
to take any action if required
8. The commission has the power to punish the contempt – The commission has the same
jurisdiction, powers and authority in respect of contempt of itself has the high court. The
commission may exercise the provisions of Contempt of Courts Act, 1971
9. The commission can pass orders where the party concerned does not carry on business
in India – In such a case, the commission can pass orders with respect to the part of the
service which is carried in India.
10. The commission has restriction of application of orders in certain cases – Order made
under MRTP Act with respect to any monopolistic or restrictive trade practice shall not
restrict –
a. The right of any person to export goods from India
b. Right of any person to restrain any infringement
11. Powers which the commission may exercise to enquire into unfair trade practice are –
a. The commission may enquire into any unfair trade practice which may come
before the commission for inquiry. The order of the commission may direct –
i. The practice shall be discontinued or shall not be repeated
ii. Agreement related to such unfair trade shall be void or shall stand
modified
iii. Information, statement or advertisement related to such unfair trade
practice shall be disclosed, issued or published.
b. The commission may permit the party to carry on the trade practice instead of
making any order if the party takes steps within the specified time given by the
commission.
12. Power related to restrictive trade practice may be exercised or performed in relation to
unfair trade practices.


Competition Law

The Competition Commission has the duty to
1. Eliminate practices that have adverse affect on competition
2. Promote and Sustain Competition
3. Protect the interests of the consumers and ensure freedom of trade carried on by other
participants in Indian market

The commission can inquire into alleged violation of provisions contained in subsection (1) of
section 3 or sub-section 3 or sub-section (1) of section 4 on matters related to –
1. Receipt of any information from any person, consumer, association

The commission shall determine whether an agreement has an adverse effect on
competition under section 2 –
1. Creation of market entry barriers
2. Foreclosure of competition hindering entry into the market
3. Accrual of benefits to consumers.
4. Using technical, scientific and economic development as a means for production and
distribution of goods or provision of services

In case the commission is enquiring about the dominant position of an enterprise under
section 4, the commission will take into account the below factors –
1. Market share of the enterprise
2. Size and Resources of the enterprise
3. Importance and size of competitors
4. Dependence of consumers on the enterprise
5. Monopoly or dominant position ( either acquired as being a Government company or
acquired as a result of the statute)
6. Entry Barriers
a. High Capital Cost of entry
b. High costs of substitutes
c. Social Obligations
d. Market Size and Structure

To consider if the market is a relevant market, the commission have due regard to the
“relevant geographic market” and “relevant product market”. Factors considered for “relevant
geographic market” are –


1. Local specification requirements
2. Trade Barriers
3. National Procurement policies
4. Language
5. Transport Cost
6. Price of goods and services
7. Consumer Preferences
8. Classification of Industrial Products
9. Physical characteristics of end-use goods
10. After-Sale Services

During any acquisition the commission can check whether the acquisition will have an
adverse affect on competition in India. The commission will take into account the below
factors in determining whether to take an action in case of any acquisition –
1. Entry barriers into the market
2. Countervailing power in the market
3. Market share as individual and as combination
4. Nature and extent of innovation
5. Extent to which substitutes are available.

In the due course of proceeding before any statutory authority, any issue raised with the
decision by the authority will be replied back within 60 days. This will help the commission to
provide new findings

The commission will meet as per the rules and procedures in regard to the transaction of
business at its meetings. The senior most people will preside the meeting in case the
Chairman is not available. All questions will be decided by majority voting

The Commission will direct the Director General to investigate any matter referred by Central
or State Government or Commission itself. Commission can close the matter forthwith in
case no evidence exists. A copy will be send to Central or State Government. The Director
General on receipt of directions from commission will submit a report for his findings. The
commission may forward the copy to parties involved.

The commission can pass the below orders in relation to abuse of dominant position –
1. Direct the concerned person/enterprise to discontinue the abuse of dominant position
2. Impose penalty


The commission (by an order in writing) directed division of the enterprise in dominant
position. This is done to ensure that the enterprises are not abusing their dominant position.
The commission can perform –
1. Transfer vesting of property, liabilities or obligations
2. Creation, collection or surrender of any stocks

In case there is a combination of two enterprises and commission is of the opinion that the
combination will have an adverse impact on the competition, the commission can issue a
show-cause notice.
1. After receiving the response from the two parties, the Director General submits his report
to the commission
2. If after receiving the response from the parties, the commission still feels that it will have
impact on the competition, the commission within 7 days will direct parties to publish
details of the combination
3. The commission may ask one person from public to file his written objections before it.

For any acts taking place outside but having an impact in India, the commission has the
power to enquire into such agreements or abuse of dominant position or combination.
In its own functions, the commission will be guided by principles of natural justice , any rules
made by central government.

The commission has powers for –
1. Summoning a person and enforcing the attendance of the person
2. Discovery and production of the documents
3. Evidence of Affidavit
4. Examination of witness or documents

The commission can call up experts in the field of economics, commerce, and accountancy
so as to assist the commission.

The commission can ratify any mistake apparent from a record.


8 Cases and Decisions


Case I - Maharashtra General Kamgar Union v HLL and TOMCO

Case I. A. no. 72 of 1993
Acts referred - Monopolies and Restrictive Trade Practices Act, 1969[s. 20, s. 26, s. 2(o), s.
2(10)(a)(i), s. 2(10)(a)(iv), s. 12A, s. 27, s. 27A, s. 33(1), s. 37], Companies Act, 1956[s.
391], Specific Relief Act, 1963[s. 41(b)]
This case was filed against a proposed scheme of amalgamation submitted by HLL and
TOMCO for the merger of TOMCO with HLL. The complainants alleged that if the merger is
allowed to take place, shall completely eliminate competition in the market of soaps and
detergents resulting into preventing, distorting and restricting competition in these products.
This case also raised questioned the powers of the MRTP Commission in view of
Amendment Act of 1991.
The Government of India announced a new industrial policy on April 27, 1991 and brought
amendments to give effect to this policy. The new industrial policy was intended and
designed to boost industrial growth and as part of that policy it was decided to do away with
all controls and regulations which were considered to have been responsible for inhibiting
industrial growth. In the MRTP Act, the major change brought about was that the pre-entry
scrutiny and restrictions on the investment decisions of the corporate sector were done away
with. However, as clearly said in the Statement of Objects and Reasons to the 1991
Amendment Act that the Commission shall continue to control and regulate the monopolistic,
restrictive and unfair trade practices as before.
The court held that it would be wrong to suppose that with the dispensation of prior approval,
the other powers of the Commission available under Chapter VI were taken away from the
purview of the Commission, visa-vis amalgamation, mergers and expansion, etc. It
confirmed the Commission's power to examine the effect of amalgamation and mergers has
remained intact notwithstanding the deletion of Sections 20 to 26 of the Act. Thus, it
declared that the Commission is fully authorized to examine the implications, impact and
effect of the scheme of amalgamation of HLL and TOMCO with a view to ascertaining
whether the scheme would not in its operation and effect produce anti-competitive results.
Finally, the court ruled that MRTP Commission has undoubted jurisdiction to entertain the
complaint and to take appropriate action permissible under the Monopolies and Restrictive
Trade Practices Act. The court commented that it was fully satisfied that it is a pre-eminently


fit case for enquiry against the respondents under Section 10(a)(i) and (iv) of the Monopolies
and Restrictive Trade Practices Act, as well as Section 27 and/or 27A of the Monopolies and
Restrictive Trade Practices Act. It found that both the respondents have sizeable and
substantial market shares in the two products thus, what is the extent, impact and
implication of these market leaders joining hands needs to be enquired into very carefully
and in depth. In its view the court further commented that in the entire constellation of facts,
it would not be unreasonable to infer that the working of the undertaking may lead to
adoption of monopolistic or restrictive trade practices. It sought to know if the impugned
combination has any countervailing advantages will be for the respondents to establish at
the enquiry. Individual clauses of the scheme relating to share price ratio and the preferential
allotment in favor of Unilever, etc., also need to be carefully examined in the context of
Sections 2(o) and 33.
The Competition Act 2002 plugged this gap, giving ex-ante power to Competition
Commission of India to block certain combination if found to adversely affect competition.

Case II - Extra- Territorial Jurisdiction – Case law relating to Float Glass

(1998)

All India Float Glass Manufacturers’ Association (AIFGMA) filed a complaint to the MRTP
Commission against three Indonesian companies. AIFGMA alleged that the Indonesian
exporter in association with Indian importers were resorting to restrictive and unfair trade
practice by way of selling float glass at predatory prices in India. They alleged that this would
restrict, distort and prevent competition by pricing out Indian producers from the market.
The MRTP Commission issued an injuction order against the Indonesian companies
restricting them to export float glass to India. This matter was brought for appeal with the
Supreme Court of India bringing into consideration the Extra-Territorial jurisdiction of the
Commission.
The Supreme Court while observing that the MRTP Act is a mechanism to counter cross
border economic terrorism, it ruled that the Commission had no extra-territorial jurisdiction in
the case. It observed that the Commission’s jurisdiction would commence after the imprort
was completed and any restrictive trade practice took place subsequently.
This decision of the Supreme Court led to arming the CCI under the Competition Act, 2002
with the power to take extra-territorial action by restraining imports, on the ground that the
imports would contravene the substantive provisions of the law.


Case III - DG. (IR) v. Indian Rayon Corporation Ltd.

Case No. UTP 5/1987 - Seeking redressal under Section 31-A(1)
Indian Rayon Corporation had launched an issue of convertible debentures as a right offer.
The advertisement gave impression to investor for a return of 84.16%. The MRTP
commission held that the representation made by the investor seeking redressal in view of
the loss incurred by him due to an advertisement were in the nature of unfair trade practice.
It directed the respondents to desist from making such statements in reference to
announcement either for debentures or equity shares issues.

Case IV - CERC v. Karnavati Auto Ltd.

UPT. E. 95/85 – under Section 36 D (1)
Karnavati Auto Ltd. had claimed a petrol consumption of 90 Km per liter by Moped sold by
them in its advertises. Automotive Research Association found that such performance was
possible only under strict test conditions. MRTP Commission passed a cease and desist
order in this case to Karnavati Auto to modify its advertisement.

Case V - DG v. Indian Institute of Management Studies

Case No. UPT E 287/88
An institute called Indian Management Development Institute had floated advertisements
making a high claim of MBA degree. On its enquiry, the MRTP commission found that this
institute does not have any affiliation from any of the recognized education body like UGC’s
University, ICSSR, AIMA, thus declaring its MBA degree to be invalid. It was found that this
institute’s advertisement was issued to gain false popularity and it was charging a fee higher
than any recognized national institute. The Commission passed a cease and desist order
restraining the institute from indulging in unfair trade practices affecting the public interest.

Case VI - DG. (IR) v. RMP of India

Case No. 63/Comp/Cas/499/1988 – Section 36 (A)
An institute describing itself as RMP of India made a mass advertisement for imparting
medical education through postal tuition by the Rural medical Practitioners’ Association of
India (Regd). This had given impression to public that a person who undergoes the postal
tuition offered by the advertiser can become a Registered Medical Practitioner (RMP). The
advertisement had camouflaged RMP of India through the common initial of a qualified and


registered medical practitioner. The correct designation would have been Rural Medical
Practitioner. The Commission used ex-parte ad interim injunction for making false and
misleading claims about its status, utility and quality of services discharged by it in the form
of postal coaching for medicine. The Commission passed an order to cease and desist on
advertisements offering unrecognized certificates.

Case VII - Palmolive (India) Limited v. Vicco Laboratories
1997 (5) CTJ 488
Vicco had a television advertisement for promoting ‘Vicco’ tooth powder, a can of an oval
shape, without any label, was shown. This advertisement was showing a white powder
coming out from a can as being useless. Colgate claimed before the Commission that this
was disparaging its product ‘Colgate’ tooth powder.
While the Commission found the can’s color and shape to resemble that of Colgate’s tooth
powder but the commercial was not making a mention of Colgate. In fact, there may even
have been no intention of depicting the can to be of Colgate,. But since the advertisement
created an impression in the viewers, that the can was of Colgate, it would be a case of
disparagement. The Commission took into account the nature of the Indian audience and
noted disparaging remarks about the uselessness of such toothpowder come through a
mysterious invisible voice. The court noted that it cannot be disputed that a TV set has
become more or less a household kit and more than 90% of the country is covered by the
TV Network. It cannot be said that illiteracy in India is all pervasive to the extent of 70% of
the population. To the ignorant and illiterate people mysterious invisible voice would be
likened to the voice of God. Such people might be inclined to believe that the white
toothpowder contained in a red-and-white colored oval shaped can would be an absolutely
useless substance.”

Case VIII - HMM Ltd. V. Director General MRTPC

AIR 1998 SC 2691
“Hidden Wealth Prize Offer’ for the buyers in Delhi was introduced in September 1985 by
HMM Limited, who manufactured and marketed Horlicks. It advertised a scheme called the.
A coupon can be found inside the bottle of Horlicks upon purchase which would indicate the
prize. The prizes included 5 Hotline Color TVs, 10 gift vouchers of Rs 2000 each for Hotline
appliances and other case prizes. The MRTP Commission had held this be an unfair trade
practice as the system of getting the coupon was nothing but a lottery.


As ruled by the Commission, only a small fraction of the buyers of Horlicks could get the
benefit of the said scheme and most got nothing. Since, the prizes were many times costlier
than the price of a bottle of Horlicks, a fact on account of which the winning of the prize
would be an overriding consideration for the product in question.
Noting the fact that some bottles of Horlicks contained a slip of paper which entitled that
buyer to a prize is not a lottery in the ordinary sense of the word, the Supreme Court, in its
judgment in 1998, commented that this was not a case of lottery as there was no draw of
lots or that a price was changed for participation in the draw.

Case IX - Godrej GE Appliances Limited v. Whirlpool of India Limited

1999 (2) CPJ 41A
‘Scratch a Gift Scheme’ was launched by Whirlpool Ltd. for every purchaser of Whirlpool
refrigerator or washing machine, was to pick a card and scratch the opaque strip on the
card. The gift offered was mentioned underneath the opaque surface, which became visible
on scratching the card. One kilogram of Arial washing powder to a two-bedroom apartment
were the gifts offered. The Commission considered this to be a lottery, and thus, an unfair
trade practice under Section 36 A (3)(b). The case had been brought before the Commission
by Whirlpool’s competitor, the Godrej GE Appliances Ltd. The MRTP Commission granted
an injection on February 20, 1997.
Later in the light of the HMM case, the Whirlpool Ltd was back before the Commission to get
the interim injunction lifted on its ‘scratch a gift scheme. The Commission, post HMM Ltd.
Case, reversed its reasoning. Citing similarity with the HMM case, it observed: ‘In this case
also, there is no draw of lots, nor any price changed for participation in the scheme. Each
participant got the value for his or her money and in addition, stood a chance for winning a
prize.’ According to the Commission, the Whirlpool case was on an even sounder
foundation, as while some purchaser of Horlicks in the ‘Hidden wealth Prize Offer’ did not get
any prize, in the ‘Scratch a Gift Scheme’ of the respondent, every purchaser under the
scheme would get gifts through of varied values.

Case X - Devyani Beverages Ltd. v. Coca Cola Ltd.

A lucky draw scheme was introduced by Coca Cola Ltd. had for its drink Coke. The lucky
winners could get a flat in Mumbai, a Honda City Car, mobile phones and walkmans. The
case of was brought before the Commission by its rival Pepsi, which claimed that it was a
lottery under Section 36 A (3) (b). The Commission had taken the stand that it was an unfair
trade practice. After the Supreme Court’s judgment in the HMM case, the Commission took
the position that the case was very much like the HMM case, and thus, not a lottery.


Case XI - Hindustan Lever Ltd. and Another v. Colgate Palmolive (India)
Limited
1999 (2) CPJ 7 - New Pepsodent v. Colgate Case
“New Pepsodent” a new tooth paste by Hindustan Lever Limited was advertised in print,
visual and hording media, claiming that its toothpaste ‘New Pepsodent’ was ‘102 percent
better than the leading toothpaste’. In the television advertisement, samples of sliva were
shown as being taken for testing, from two boys, hours after brushing. One boy was
supposed to have had brushed with the ‘New Pepsodent’, while the other had brushed,
according to the commentary, with a leading toothpaste’. The test of the two samples was
visually depicted, side by side. The sliva of the boy who had brushed with ‘the leading
toothpaste’ was showed as containing a large number of germs, while the slide of the sliva
of the other boy, who had brushed with the New Pepsodent, showed a negligible quantity of
germs. While the sample was being taken from the boys, there were asked to name the
toothpaste with which they had brushed in the morning. One boy had said Pepsodent. The
response of the second boy was muted. However, the lip movement of the boy indicated that
he was saying ‘Colgate’. Also, while the muting was being done, there was a sound in the
background, of the jingle used the Colgate advertisement.
Colgate and Hindustan Lever’s market share were 59 % and 27% respectively. The
Commission, thus, was of the view that a reference to the ‘leading brand’ and ‘famous brand’
was in effect, a reference to Colgate. A Doubt, however, was raised that the statistics on
market shares are produced by market research agencies. The consumers are not
generally, aware of these. Thus, a view needs not necessarily interpret the ‘leading brand’
as meaning Colgate toothpaste. The commission, however, observed that Colgate has been
in the business of manufacturing and selling toothpaste in India, for more than 50 years.
According to the Commission, the word, ‘toothpaste’ has become synonymous with Colgate
over the years. The Commission, in addition, noted that the jingle in the background was a
familiar one and was associated with Colgate. The comparative product in the television
commercials could, thus, be identified as the Colgate dental cream. Thus, it became a case
of comparative advertisement and a claim could be made of disparagement of Colgate’s
products.

Case XII - Allied Tube & Conduit Co. v. Indian Head, Inc.

486 US 492, 1988


In this case, an association that published a code of standards, for electrical equipment,
required the use of steel conduits in high-rise buildings, but a new entrant into the market
proposed to use plastic conduits. This new product was cheaper to install, more pliable and
less susceptible to short-circuits. The incumbent steel conduit manufacturers agreed to use
the association’s procedures to exclude the plastic product from the code using voting in
association’s annual meeting. This resulted into blocking entry of a potential product in
market and consumers were denied the benefit of a potentially significant product
innovation.
The US Supreme Court held that a subgroup of the standard setting organization effectively
“captured” the whole group and harmed competition by excluding an innovative product.


9 Critique of Law

1. MRTP Act was based on pre-reforms command and control regime. An organizations
size and structure were considered a factor into the Act. Offences with relation with
competition were not defined and they were implicit.
2. This act made it mandatory registration for agreements. There were combination
regulations which were dropped after 1991 amendment.
3. This act did not advocate for competition but mostly in restriction nature. It provided for
“rule of law” approach instead of “rule of reason” approach. Also, this Act do not have
any penalties for offences, which were corrected in 2002 amendment.
4. Disposal of cases - In any country an essential component of the grievance redressal
system is a competition authority with adjudicative power. However, the MRTPC could
not play this role effectively due to its inefficiency. Number of pending cases with
MRTPC is growing over the years. It is a common feeling that cases resolved by MRTPC
were of less serious nature than the most warranted cases which are kept unattended
5. Business Cartels - It is believed that there are several cartels are running openly in the
market and MRTPC is not able to break them. The Cement cartel case has come to
MRTPC multiple times but it could do very little about it. Similarly, in a case of Vitamin
cartel which is spread over multiple countries and impact Indian consumers severely, the
Commissions response was not encouraging.
6. Right to Consumer Education is grossly neglected in the MRTP Act. There is very low
awareness on competition issues, amongst the stakeholders, including consumers and
consumer organizations, though prevalence of anti-competitive practices is quite
ubiquitous. Without proper education these cannot dealt effectively.
7. A formal mechanism to ensure consumer representation in the implementation of the Act
is missing. Some states have district level consumer protection councils. Also, some
regulators have arrangement for consumer representation in telecom and electricity.
8. One of the consumer rights “Right to Choice” is probably the most relevant consume
right on which competition policy and law have important bearing. In simple terms there
should be range of varieties/producers available to consumers in each product and
services. But, the 1991 amendment to the MRTP Act has removed the merger review
provision. This meant the number of players would reduce and a risk of higher prices or
anti competitive arrangements.


9. Inadequate budget and independence of the MRTP Commission is another reason for its
inefficiencies. The budget allocated by department of company affairs is very small
fraction of GDP and Govt of India budget. Though, there is no benchmark for this
fraction, it is very small in comparison with similar budget given to Competition
Authorities in comparable countries.

Competition Law
1. Independence and autonomy of CCI is undermined by certain provisions of the Act. The
Chairperson of CCI needs Central Government’s prior approval before transfer of any
member from one bench to another bench in different cities. This provision prejudices
the autonomous functioning of the Chairperson.
2. CCI would require grant of money from Central Government with due appropriation
made by Parliament. There is a clear prejudice to CCI’s independent and autonomy
where it has to make time to time request to government for funds.
3. The Central Government has power to supersede any directive of CCI on certain
grounds like in public interest and non-compliance of a direction given by Government.
4. Unfair trade practice is not a part of the act because Consumer Protection Act 1986
already have provisions of this. With removal of these provisions, CCI may face a major
challenge to get the public buy-in, and to create a public image.
5. The Competition Act 2002 is not another law supplementing the existing MRTP Act
instead it would supplant the MRTP Act. This new law is simpler, more flexible and more
liberal than the outgoing law of MRTP Act, 1969. CCI should be made accountable
through independent review by consumer organizations, external agencies and peer
review by competition authorities from other countries.


10 Comparative Study
This section provides an overview of the fair trade and market protection acts followed in the
United States. It also briefly covers how the enforcement of these laws is done and
exemptions to these laws.

Historical Information
The Sherman Act and the Clayton Act are the two basic antitrust laws in the United States.
These acts are enforceable either by the Antitrust Division of the Department of Justice or
the Federal Trade Commission. In addition, the Federal Trade Commission (FTC) Act and
the Robinson-Patman Act may also be utilized by the Commission to enforce the
malpractices in trade.

U.S. Senator John Sherman of Ohio introduced the Sherman Antitrust Act in the United
States Congress in 1890. The state of Ohio took an early leadership role in this enforcing
this practice. The Valentine Anti-Trust Act was signed into law during Bushnell
Administration. In addition to the prohibition of practices such as price fixing, and production
limitation, Bushnell's attorney general pursued the monopolistic practices of the Standard Oil
Company in the courts. Eventually, this law served as the first serious attempt by the federal
government to break up monopolies and trusts.

The Clayton Antitrust Act of 1914, was introduced by Alabama Democrat Henry De Lamar
Clayton, Jr. in the U.S. House of Representatives. The Clayton act specified particular
prohibited conduct, the three-level enforcement scheme, the exemptions, and the remedial
measures. This act is passed during the Wilson administration and it was.

US Antitrust Laws

This sub-section briefly summarizes the primary United States antitrust statutes, and some
of the activities which are generally considered to be violations of those laws.

Together, these laws spell out the conduct and activities prohibited in economic and market
transactions. There are also some statutes directed to specific industries or types of
transactions which indicate the likely antitrust consequences for economic conduct in those
areas.


In general, the antitrust laws are concerned with the functioning of the marketplace – i.e.
competition and not the protection of any individual competitor.

Sherman Antitrust Act

The Sherman Act is divided into three sections. Section 1 delineates and prohibits specific
means of anticompetitive conduct, while Section 2 deals with end results that are
anticompetitive in nature. Thus, these sections supplement each other in an effort to prevent
businesses from violating the spirit of the Act, while technically remaining within the letter of
the law. Section 3 simply extends the provisions of Section 1 to U.S. territories and the
District of Columbia.

The Clayton Act

The Clayton Act made both substantive and procedural modifications to federal antitrust law.
Essentially, the act seeks to capture anticompetitive practices in their incipiency (from the
beginning) by prohibiting particular types of conduct, not deemed in the best interest of a
competitive market. There are 4 sections of the bill that proposed substantive changes in the
antitrust laws by way of supplementing the Sherman Act of 1890.

The Clayton Act (as amended by the Robinson-Patman Act) prohibits any person engaged
in interstate commerce from
1. Practicing price discrimination among customers that cannot be justified by differences
in production costs, transportation costs, or other cost differences;
2. Entering into exclusive dealing or tying arrangements that restrain interstate trade or
commerce; and
3. Effecting any merger the effect of which may be to substantially lessen competition.

The Federal Trade Commission Act

This act prohibits “unfair methods of competition” and “unfair or deceptive acts or practices”
in or affecting interstate commerce.

Enforcing Antitrust Statutes

Federal antitrust laws are enforced by the following authorities:
1. U.S. Department of Justice (DOJ)
2. Federal Trade Commission (FTC)


3. Private Enforcement: Individuals and companies who have been injured by the anti-
competitive behavior of others may recover privately under federal antitrust law if they
can show that the alleged antitrust violation caused.

Terms Used to Check the Legal Violations

The following terms are crucial to the understanding and application of the laws and various
terms defined within each.
1. Per Se Violation: Certain anticompetitive acts or agreements (e.g., a price fixing
agreement among competitors) are considered to be so injurious to the public that there
is no need to determine whether competition is actually reduced or otherwise injured;
hence these acts are considered are violations of the Sherman Act per se
2. Rule of Reason: Acts or agreements that are not considered to be illegal per se are
analyzed by comparing their positive effects (e.g., efficiency) against their potentially
anticompetitive effects. If the act or agreement is found not to unreasonably restrain
trade, it will not be considered a violation of the Sherman Act.
3. Less Restrictive Means: Courts will often look to see if the parties could have achieved
the same benefits using means that would have had a less restrictive effect on
competition.

The following sub-sections provide an overview of the various practices that are restricted
under these acts.

Horizontal Restraints

It means any agreement that restrains competition between rival firms operating in the same
geographic or product market. The restraints include practices such as Price fixing, Group
boycott (group of sellers decide to boycott product or service from a particular person or
group of persons), Market division, Trade association and Joint Venture.

Vertical Restraints

It refers to any agreement between firms at different levels in the manufacturing and
distribution process that restrains competition. The restraints include practices such as
Territorial or customer restriction, Resale price maintenance, Maximum resale price fixing,
and Refusal to Deal.


Monopolization

Monopolization refers to the firms possessing monopoly power in the relevant product or
geographic market. The relevant product market includes, all other goods with identical or
substantially identical attributes, as well as all other goods that are reasonable substitutes. It
also includes Predatory Pricing, i.e, pricing a product below the cost of producing it in order
to drive competitors out of a market.

Price Discrimination

The phenomenon of Price Discrimination occurs when a seller charges different prices for
the same goods or services to competing buyers. These acts violate the section 2 of the
Clayton Act by lessening the competition substantially. To better understand the clause,
Price discrimination based on differences in production costs, transportation costs, or other
cost differences will not result in a violation of the Clayton Act. And, any price discrimination
will also be excused if the seller can prove that lower price is temporary to match or beat the
price of a competing seller.

Exclusionary Prices

This refers the situation in which a seller forbids a buyer from purchasing products from the
seller’s competitors, as it would tend to create monopoly power.

Mergers

Certain types of mergers are prohibited in Clayton act as it is looked at as an attempt to
reduce the market competition or an effort to acquire monopoly. It prohibits Horizontal
mergers (mergers between two firms that are competing in the same product or geographic
market) and Vertical mergers (merger of one firm at a particular stage of the production and
distribution, for example, raw materials provider, with another firm at a different stage of the
production and distribution process, in this case manufacturer, of the same product.
Further, the Clayton act enforces restriction on the mergers between Conglomerate and
mergers made for the purposes of Market-Extension, Product-extension and Diversification.

Interlocking Directorates

Section 8 of the Clayton Act imposes restrictions on the practice of any person serveing
simultaneously on the board of directors of two or more corporations that are in competition
with one another.


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