Beruflich Dokumente
Kultur Dokumente
ANTICOMPETITIVE PRACTICES
AND
ROLE OF LAW IN INDIA
BY
ANOOP KUMAR
ROLL NO.
11
SUBMITTED TO
MRS. MADHU SRIVASTAV
DR. RAM MANOHAR LOHIYA NATIONAL
LAW UNIVERSITY
LUCKNOW
MARKET COMPETITION AND NEED FOR REGULATIONS
According to the World Bank ‘Competition’ is “a situation in a market in which
firms or sellers independently strive for the buyers’ patronage in order to achieve a
particular business objective for example, profits, sales or market share.”
Sometimes firms while competiting with one another, adopt restrictive or
unfair practices, which are derogatory to the core of a competitive market. These
practices include fixing prices with rivals, setting price which is lower than cost in
order to throw out competitors from the market, taking advantage of a monopoly
position and charging unreasonable price, refusal to buy or supply, and the like.
While increasingly more countries have undertaken marketoriented economic
reforms, at the same time more and more countries have either enacted a
competition law or scrapped their old laws to enact a new one. India, for instance,
has framed the Competition Act, 2002, to replace the now outgoing Monopolies
and Restrictive Trade Practices (MRTP) Act, 1969.
India has adopted the regulations, policies and reforms that give thrust to
curbing any kind of monopoly and give emphasis to the competition in the market.
MERITS OF COMPETITION
I. Provides employment. Competitive markets tend to provide the poor with
opportunities to set up their own business. An inference can be drawn from a
situation in which there is only one supplier of food items in a market. He is in
the position to charge the price according to his whims and fancies, or in other
words can say he has monopoly in that market. Thus he can earn enough
profit, adopting such practices. The situation would have been otherwise if
there had been more than one supplier in that market. This impliedly attracts
others to participate in the process of supplying these products, and thereby
creating an environment to unleash creative energies of entrepreneurs and
productive forces of society, and thereby expand opportunities for gainful
employment.
III. Choice for the consumer. In a competitive market, consumer can expect
wider choice of goods and services at reasonable prices and best quality.
Competition compels the firms to minimize their costs and pass on the cost
reductions to consumers. If the consumer can’t afford to buy some product
from one shop or he is unsatisfied with the quality of product sold by some
shopkeeper, he can easily switch to the other shop dealing in the same trade. In
this way, consumers, especially the poor, can get value for money.
COMPETITION LAWS IN INDIA
I. Monopolies and Restrictive Trade Practices Act. The year 1969 saw the
emergence of government regulations that strived to curb the monopolies
and other such practices that hampered the welfare of the consumers. By
enacting the Monopolies and Restrictive Trade Practices Act, 1969
(MRTP Act), the Government played its role, that was assigned to it by
Articles 38 and 39 of the Indian Constitution which are the part of the
Directive Principles of State Policy. Theses articles mandate that the
Government will take necessary steps to promote welfare of the masses and
that the State shall direct its policies towards securing:
a. that the ownership and control of material resources of the community
are so distributed as best to subserve the common good; and
b. that the operation of the economic system does not result in the
concentration of wealth and means of production to the common
detriment.
The competition law in India was adopted on the pattern of laws embodied
in the Sherman Act and the Clayton Act of the United States of America, the
Monopolies and Restrictive Trade Practices (Inquiry and Control) Act, 1948,
the Resale Prices Act, 1964 and the Restrictive Trade Practices Act, 1964 of
the United Kingdom and also those enacted in Japan, Canada and Germany.
The drafting of the MRTP Act was influenced by the U.S. Federal Trade
Commission Act,1914 as amended in 1938 and the Combines
Investigation Act, 1910 of Canada also influenced the drafting of the MRTP
Act.
Objectives and Emphasis. The Act was passed vith a view to prevent
concentration of economic power, control monopolies, and prohibit
monopolistic and restrictive trade practices. Through the amendment of
1984, a provision regarding the consumer protection, namely Unfair trade
practices, was inserted in the Act. The term Unfair trade practices covered
deception, misleading claims and advertising.Unfair Trade Practices have
been defined as trade practices which for the purpose of promoting the sale,
use or supply of any goods or for provision of any services, adopt one or
more of the practices mentioned therein and thereby cause loss or injury to
the consumers of such goods or services, whether by eliminating or
restricting competition or otherwise1.The principal objectives the MRTP Act
sought to achieve are:
i. prevention of concentration of economic power to the common
detriment;
1 Sec. 36A of MRTP Act,1969
ii. control of monopolies;
iii. prohibition of Monopolistic Trade Practices 2(MTP);
iv. prohibition of Restrictive Trade Practices (RTP);and
v. prohibition of Unfair Trade Practices (UTP).
RESTRICTIVE TRADE PRACTICES (RTPs)
In the Monopolies and Restrictive Trade Practices (MRTP) Act, 1969, restrictive
trade practice has bee defined3 as a trade practice which tends to prevent, distort or
restrict competition. In particular, a practice, which tends to obstruct the flow of
capital or resources into the stream of production is an RTP. Likewise the acts
which tend to bring about manipulation of prices, or conditions of delivery or to
effect the flow of supplies in the market relating to goods or services in such
manner as to impose on the consumers unjustified costs or restrictions are
Restrictive Trde Practives. Certain common types of Restrictive Trade Practices
enumerated in the MRTP Act are:
i. Refusal to deal
ii. Tieup sales
iii. Full line forcing
iv. Exclusive dealings
v. Price discrimination
vi. Resale price maintenance
vii.Area restriction
Onus is on the entity, body or undertaking charged with perpetration of the
Restrictive Trace Practice to plead for gateways provided in the MRTP Act itself
to avoid being indicted.
UNFAIR TRADE PRACTICES (UTPs)
Prior to 1984, the MRTP Act contained no provision relating to the unfair trade
practices.It was through the reccomendations of Sachchar Commitee in the year
1978, that a separate Chapter was added to the MRTP Act defining various Unfair
2 Sec. 31 & 32 of the Act.
3 Section 2(o) of the Act.
Trade Practices. The provision was inserted with a view to enable the consumers,
the manufacturers, the suppliers, the traders and other persons in the market
conveniently identify such practices. A chapter on the Unfair Trade Practices
(UTPs) was inserted in the MRTP Act by through the Amendemnt of 1984.
Essentially (UTPs)4 in the MRTP Act include
i. Misleading advertisement and false representation.
ii. Bargain sale, bait and switch selling.
iii. Offering of gifts or prizes with the intention of not providing them
and conducting promotional contests.
iv. Product safety standards.
v. Hoarding or destruction of goods.
MONOPOLISTIC TRADE PRACTICES (MTPs)
The provision regarding MTPs in the Act was given shape by the Amendment of
1984. An MTP is a trade practice which :
i. leads to charging of prices of goods and services unreasonably, by
reducing or controlling the production, supply or distribution of
goods or supply of any services or in any other manner;
ii. unreasonably prevents or restricts competition in the supply or
distribution of any goods or services;
iii. limits technical development or capital investment to the detriment
or allowing the quality of any goods produced, supplied or any
services rendered, in India, to deteriorate;
iv. unreasonably increases the cost of production of any goods or
charges for the provision, or maintenance, of any services;
v. unreasonably increases
a. sales price of goods, or the charges at which the services are
provided or may be provided;
b. the profits which are, or may be, derived by the production,
supply or distribution (including the sale or purchase of any
4 Defined under section 36A of the Act.
goods) or in the provision or maintenance of any goods or by
the provision of any services;
vi. prevents or lessens competition in the production, supply or
distribution of any goods or in the provision or maintenance of any
services by the adoption of unfair methods or deceptive practices.
Prior to the 1991amendments in the MRTP Act, a dominant undertaking could
expand or commence a new undertaking after the approval of the Government
under the Act. During the year 1991, a notification was issued by the Government
through which the MRTP Act there was no distinction left between public sector
undertakings and private sector companies in the matter of Monopolistic,
Restrictive and Unfair Trade Practices. Defence undertakings which are still
outside the ambit of the MRTP Act.
II. Post1991 era.
Failure of MRTP Act and emergence of Competition Act, 2002.