PROJECT WORK

MONOPOLISTIC RESTRICTIVE TRADE PRACTICES ACT, 1969: AN ANALYSIS

SUBMITTED TO: SUBMITTED BY:

Mrs. Deepali Sahoo Shailesh Suthar

(L/191)

Assistant Professor Scholar

School of Law School of Law

Raffles University Raffles University

TABLE OF CONTENTS
1. Acknowledgment.
2. Introduction.
3. Provisions of Constitution Leading to the Enactment of MRTP Act, 1969.
4. Evolution of the MRTP Act, 1969 as a Competition Law.
5. Legislative Development & Metamorphosis from MRTP Act to New Competition Law
under the Light of New Competition Policy.
6. Bibliography.
ACKNOWLEDGMENT

I take this opportunity to express my humble gratitude and personal regards to Mrs. Deepali
Sahoo for inspiring me and guiding me during the course of this assignment work and also for
his cooperation and guidance from time to time during the course of this assignment work on the
topic.

I have prepared this assignment not only for marks but also to increase my knowledge.

-Shailesh Suthar
INTRODUCTION

The Government adopted the Monopolies and Restrictive Trade Practices (MRTP) Act in 1969
and accordingly the MRTP Commission was set up in 1970. The Commission was set up to
investigate the effects of such practices, case by case, on the public interest and to recommend
suitable corrective measures. The preamble to the MRTP Act described it as “An Act to provide
that the operation of the economic system does not result in the concentration of economic power
to the common detriment for the control of monopolies, for the prohibition of monopolistic and
restrictive trade practices and matters connected therewith or incidental thereto.”

The MRTP Act has made distention between monopolistic and restrictive trade practices.
Accordingly, the monopolistic trade practices was described as “dominant firm practices”, i.e., a
firm or a oligopolistic group of three firms, after attaining a dominant position has been “able to
control the market by regulating prices or output or eliminating competition.”
Restrictive trade practices include concerted action undertaken by a group of two or more firms
so as to avoid competition from the market irrespective of their market share. These types of
practices are “deemed to be prejudicial to public interests.”

In order to make necessary review of the working of MRTP Act and to make necessary
recommendation for streamlining its activity, the Government appointed a Sachar Committee in
1977. On the basis of the recommendations made by this committee, the Government made
necessary amendments in Act in 1980 and also in 1984. In 1991, a significant amendment was
made where chapter (III) on Monopolies was dropped.

OBJECTIVES

The principal objectives sought to be achieved through the MRTP Act are:

i) Prevention of concentration of economic power to the common detriment;

ii) Control of monopolies;
iii) Prohibition of Monopolistic Trade Practices (MTP);
iv) Prohibition of Restrictive Trade Practices (RTP);
v) Prohibition of Unfair Trade Practices (UTP).1

PROVISION OF CONSTITUTION LEADING TO THE ENACTMENT OF MRTP ACT 1969

India has had a history of competitive markets. Kautilya’s Arthashastra, deals with statecraft and
economic policy. Articles 38 and 39 of the Constitution of India mandate that the government 
shall secure and protect the society where people will get social, economic and political justice 2
and it shall address all the organizations of the nation, and the State shall direct its policy as-

1. The ownership and control of material resources are so distributed as best to assist the
common good.
2. The economic system does not operate as it creates a concentration of wealth and means
of common detriment.

The MRTP Act was in consequence of the above mentioned prevention of concentration of
economic power3 which is the mandate in the Directive Principles of the Constitution of India.
India adopted a planned economic development strategy since independence.

India chose a centrally planned economic structure also referred to as the Nehruvian
socialism model. The Nehruvian model was a mixed economy model – a model that was neither
a market economy like the United States of America nor a socialist economy like it was then in
the USSR.

1
PRADEEP S. MEHTA, A FUNCTIONAL COMPETITION POLICY FOR INDIA, 46 (2006).
2
K.L. KRISHNA & UMA KAPILA, READINGS IN INDIAN AGRICULTURE AND INDUSTRY (2009); Saroj Bohra, “Social
Justice and Indian Constitution” 2 INT’L J. L. & LEGAL JURIS. (2015).
3
P.K. JALAN, INDUSTRIAL SECTOR REFORM IN GLOBALISATION ERA, 104 (2004).
Under the mixed model, both the private and public sector co-existed. Since independence of
the country in 1947, India adopted and followed policies comprising ‘command and control
‘laws, rules, regulations and executive orders. The Industrial Policy Resolution of 1948 and 1956
emphasized the state role in the industrial development, growth, social justice as a regulator by
defining the parameters of regulatory mechanism.4

Industrial (Department and Regulation) Act (IDRA), 1951 empowered the government to

regulate almost every aspect of the functioning of the private sector. The private sector was
allowed limited licensed capacity in the core sector and public sector were patronized to achieve
growth and development of core industries like coal, oil & natural gas, iron & steel, power &
energy etc.

It evolved a market where there was no such contestable competitor as the state controlled
almost all areas of economic activities and intervened every step of the business process and
financial actions of the private sector which restricted its growth and favored public sector
companies.

The public sector companies were made responsible for the economic growth of the
country. Entry or exit was not easy for business. Interventions and restrictions were everywhere
for private companies– from plant size to site location, from financial allocations to foreign
investments.

Free competition in the market suffered a lot mainly because of Govt. policies– it only
favored public sector and big business houses as they were in a position to raise huge fund and
avail technical and managerial supports to achieve the skill to grow. High tariff and no proper
license allocating system established an environment where big businesspersons succeeded in
getting entry into the industry and survive with no competition. This led to the concentration of
economic power in only a few individuals or business groups which created monopolistic trade
practices and License-Raj.

4
UMA KAPILA, RECENT CHANGES IN INDIAN ECONOMY: WITH SPECIAL REFERENCE TO STRUCTURAL REFORMS
PART 2, 104 (1993).
This compelled the Government to reform the Indian economy. The license raj regime
continued until the early 1990’s.The economic crisis faced by the country led to economic
reforms and initiation of the New Economic Policy (NEP) 1991 and the New Industrial Policy
(NIP) 1991. Competition law became very important than before in this new Liberalization
-Privatization- Globalization (LPG) era.

Competition has been helping the Indian consumer and industry to provide better public services
since then. Greater competition boosted the Indian economy to become one of the best
performers in the recent years. Competition has become a driving force in the Indian economy as
an environment is essential that facilitates fair competition, restrain anti-competitive behavior
and unfair trade practices.

EVOLUTION OF MRTP AS A COMPETITION LAW 

Even before the Glasnost and globalization which took place in the early 1990s, India took
regulatory measures by means of an antitrust act named Monopolies and Restrictive Trade
Practices (MRTP) Act in1969.

From 1969 to 2003 Govt. provided the regulation to the monopolistic trade for the first time by
virtue of the enactment of this Monopolies and Restrictive Trade Practices Act (MPTP Act)
which inspired by the mandate of the Directive Principles of State Policy in the Constitution of
India. The Preamble of the MRTP Act preached a socialistic philosophy intended to ensure
that the operation of the economic system did not led to the concentration of economic
power to the common detriment.

The Act advocated for the prohibition of Monopolistic and Restrictive Trade Practices. However,
it was not meant for all sectors of the economic system and did not apply to the public sector,
government undertakings and undertakings by state & central Govt. Corporation, banks, the
State Bank of India and insurance companies of India which restricted the scope of the Act. As a
result, the Parliament of India enacted Competition Act, 2002 in 2003. Competition Act deals
with anti-competitive agreements, abuse of a dominant position and a combination or an
acquisition.

Three enquiries conducted by three different committees acted as the loadstar for the enactment
of the MRTP Act. Those are-

 The Committee under the chairmanship of Mr. Hazari studied licensing procedure for
the Industrial sector under the Industries (Development and Regulation) Act, 1951. 5 The
Committee found that licensing system led to the disproportionate growth of some big
business houses (Hazari, 1965).
 In October 1960 a committee was set up which was chaired by Professor
Mahalanobis. The Committee enquired the distribution and levels of income and came to
a conclusion in February 1964 that the top 10% of Indian population cornered almost 40%
of the income and the big business companies were flourishing because of the existence of
country’s ‘planned economy’.
 The Government of India appointed ‘The Monopolies Inquiry Commission (MIC)’
in April, 1964 which was chaired by Mr. Das Gupta. The Committee researched about the
monopoly practice in the industry and its impact on the Indian economy. The Commission
reported in October 1965 that product wise and industry wise concentration of economic
power existed in the system due to large-scale restrictive and monopolistic trade practices
as a few business houses were operating a large number of companies.

As a consequence of its findings, the Monopolies Inquiry Commission drafted a Bill which was
amended by a Parliamentary Committee and became the ‘Monopolies and Restrictive Trade
Practices Act, 1969 (MRTP Act)’ and was enacted from 1st June, 1970.

The MRTP Act intended to protect consumers as well as to avoid concentration of wealth and
aimed to prevent-

A). Concentration of economic power.

5
PRADEEP S. MEHTA, A FUNCTIONAL COMPETITION POLICY FOR INDIA, 40 (2006).
 B). Prohibition of monopolistic, unfair or restrictive trade.

Economic Reforms and its Impact on the MRTP Act

The MRTP Act became ineffective for different reasons. For example– the frequently changing
industrial policy of Indian Government. Major amendments to MRTP Act was undertaken in –

 1984 – major addition was relating to Unfair Trade Practices

 1991 – deletion of chapter relating to Mergers and Acquisitions and Addition relating to
Award of Compensation

The monopoly of the public sector was abolished in 1991. For example- licensing had been
abolished and opened for the private sector in 6 core industrial sectors like steel, heavy electrical
equipment, aircraft, air transport, shipbuilding, telecommunication equipment and electric power
were made open for private sector investments.

Some difficulties arose while practicing and implementing MRTP Act were as follows –

 Lack of clarity on various definitions and interpretations – the Act neither define nor
even mention certain trade practices which are restrictive in character. Such as- abuse of
dominance, cartels, collusion and price fixing, bid rigging, boycotts and refusal to deal,
predatory pricing etc.

 Discrimination between public and private sector – in spite of being a competition

law, the MRTP Act could not be effective in the absence of the element of
competition. For example, the protection and favour offered in pricing and purchase
preferences to public sector, hampered competition where the private companies were also
operating in the market without getting any favour from the Govt.

Upon realization of the necessity for review of the MRTP Act, the government appointed a high-
powered expert committee chaired by Justice Rajinder Sachar, in June 1977 to consider and
suggest suitable changes. The Sachar Committee presented a report to the Government in
August, 1977.

 The LPG Paradigm – after the economic reforms in 1991, there had been a subsequent
change in the economic scenario with the effects of liberalization, privatization and
globalization,6 which impelled the need for a new competition law.

As a result of adopting liberalization, India accepted and agreed to two important agreements of
the World Trade Organization namely General Agreement on Tariffs and Trade (GATT) and
Trade Related Aspects of Intellectual Property Rights (TRIPS).  It led to the capability of
multinational companies to enter the Indian market which made the MRTP Act less important
and less effective and MRTP Commission under the MRTP Act realized that a new legislation
was needed. The origin of a much needed new law lies in Finance Minister’s budget speech in
February, 1999 –

“The MRTP Act has become obsolete in certain areas in the light of international economic
developments relating to competition laws. We need to shift our focus from curbing monopolies
to promoting competition. The Government has decided to appoint a committee to examine this
range of issues and propose a modern competition law suitable for our conditions.”

The Govt. of India constituted a High Level Committee on Competition Policy and Competition
Law, chaired by Mr. S V S Raghavan , a retired senior Central Govt. officer (popularly known as
‘Raghavan Committee’) in October 1999 to advise a new and effective contemporary
competition law to cope up with the international economic developments and to recommend a
suitable legislative framework, which may imply a new law relating to competition law for
necessary amendments in the MRTP Act, 1969.

The Raghavan Committee considered between amending the existing MRTP Act and
enacting a new modern competition law. 7 They agreed to the finance minister’s view that the

6
ALVIN, THE INDIAN ECONOMY SINCE 1991: ECONOMIC REFORMS AND PERFORMANCES (2009).
7
Vijay Kumar Singh, “Competition Law & Policy in India: The Journey in a Decade” http://nujslawreview.org/wp-
content/uploads/2016/12/vijay-kumar-singh.pdf
MRTP Act has become obsolete in certain areas in line with the international economic
developments relating to competition laws.

The amendments of MRTP Act would only be beneficial for curbing monopolies and it wouldn’t
be effective for the fair competition in the market economy. It was perceived by the Raghavan
Committee that drafting a new and modern competition law suitable for Indian economy would
be most beneficial for promoting competition and suitable for dealing with issues of the
competition of the new liberal business atmosphere, which was the main focus of the Indian
Govt.

This led to the enactment of the Competition Act. The report of the Raghavan Committee
concluded in May 2000. The committee studied the government strategies and policies and their
effect on the Indian industrial system, the insufficiencies and inadequacies of the Industry to
compete with multi-nationals.

The major recommendations and suggestions submitted to the government were:

1. To repeal the MRTP Act and to enact a new Competition Act for the regulation of
Anti-competitive agreements and to prevent the abuse of dominance and combinations
including mergers.
2. To eliminate reservation of products in a phased manner for the Small Scale
Industries and the Handloom Sector.
3. To divest the shares and assets of the government in state monopolies and privatize
them.
4. To bring all industries in the private as well public sector within the proposed
legislation.

LEGISLATIVE DEVELOPMENT & METAMORPHOSIS FROM MRTP ACT TO NEW

COMPETITION LAW UNDER THE LIGHT OF NEW COMPETITION POLICY

After recommendations of the committee, the Govt. of India consulted all concerned stakeholder
including the associations of trade and industry and also the general public. On the basis of the
recommendations of the Committee and the suggestions from concerned parties, a ‘draft’ of
competition law was presented to the Government of India in November 2000 and the
‘Competition Bill’ was introduced in the Parliament by the Government which was plotted
basically to restrain monopolies in the market with a modern new competition law in
synchronization with the established principles of competition law.

Bill was referred to the Parliamentary Standing Committee. After considering the
recommendations of the Standing Committee, the Parliament passed the ‘Competition Act,
2002′ in December, 2002 as the first step towards the transformation from old obsolete laws to
the neo-liberal economic condition suited competition law.8

The Competition Act received the assent of the President and it came into existence on the
13th January, 2003.  This Act was introduced as a replacement to the MRTP Act under the
provision in Section 55 of the Competition Act which states the repeal of MRTP Act and for the
transfer of cases of related matters to the Competition Commission of India (CCI).

Competition Commission of India (CCI) was established under the Competition Act.
(Sec.7) to regulate competition and to implement the Act. The government notified rules and
regulations to select the chairperson and other officials to form the first ever Competition
Commission of India (CCI) which was established on the 14th October, 2003.

Competition Commission of India consists of a chairperson and six other

Members. Competition Commission of India (CCI) functions as a quasi-judicial body and
acts as a regulatory body to prevent and regulate anti-competitive business practices in the
country. The Competition Act is created by the central government and parliamentary
legislature and there is no equating state govt. law. A competition appellate tribunal has also
been established namely The Competition Appellate Tribunal (COMPAT).After enactment of
the Act, it was subsequently amended in different times.

A. THE COMPETITION (AMENDMENT) ACT, 2007 was approved by the Parliament

of India in September 2007 and received assent from the President of India on
8
Aditya Bhatacharjea, “Amending India’s Competition Law,” ECONOMIC & POLITICAL WEEKLY (2006).
 24th September 2007. The validity of the commission was challenged before the
apex court of India in ‘Brahm Dutt v. Union of India’ 9, where the Government of
India specified about amendments and the Act was amended substantially. The
amendment changed the then existing regulatory infrastructure of the Competition
Act significantly. This amendment Act inter alia divided the competition authority
into two –

i. THE COMPETITION COMMISSION OF INDIA (CCI)  would be an expert

administrative body which will function as collegium and as a market regulatory
authority to prevent anti-competitive practices in the country and will function as
an advisory body and also have advocacy functions.
ii. THE COMPETITION APPELLATE TRIBUNAL (COMPAT) to execute adjudicatory
functions as mentioned u/s 53A of the Act. And to hear appeals against any
counsel or directions made by the Competition Commission of India. The orders
or decisions of the COMPAT can be challenged in the Supreme Court.

B. THE COMPETITION (AMENDMENT) ACT, 2009- The Commission notified the

provisions of the Competition Act relating to anti-competitive agreements and
abuse of dominant positions on 20th May, 2009 under the Competition Act. For
amendment of Section 66 of the Competition Act, 2002, an ordinance was issued
by the President of India on the 14th October, 2009 named as “The Competition
(Amendment) Ordinance, 2009”

The ordinance was replaced by the ‘Competition (Amendment) Bill, 2009′ which was passed by
the Parliament of India on 14th December, 2009 by the Lok Sabha and on the 16 th December,
2009 by Rajya Sabha. The Bill was converted into an Act. As a result of the enactment of the
Act, pending cases on which the jurisdiction of MRTPC was to continue for 2 years after the
repeal of the MRTP Act will now have the jurisdiction of the Competition Appellate Tribunal in
accordance with the repealed MRTP Act.

9
AIR 2005 SC 730.
The Competition Commission of India was established in October 2003. However the operative
provisions of the Competition Act would be brought into force in two phases in May, 2009 and
in June, 2011 respectively. In the 1st phase, the anti-competitive agreement and abuse of
dominance provisions were notified. Subsequently, the combination provision was notified.

The Ministry of Corporate Affairs, Government of India has constituted a committee to frame
the National Competition Policy and to check other related issues and suggest the changes &
strategies for fine-tuning the Competition Act. A draft National Competition Policy was prepared
by the committee which emphasized on the establishment of a National Competition Policy
Council (NCPC) which will enforce National Competition Policy.

The Committee recommended the changes required in the Act and proposed a methodology and
the strategy of coherence between government policies and the competition policy and
competition advocacy. The Ministry of Corporate Affairs, Government of India had moved a
Competition (Amendment) Bill, 2012 on the 10th December, 2012 in the upper House of the
Parliament to amend the Competition Act further, with a view of fine tuning of the provisions of
the Competition Act and to get in line with the present day requirements of the market in the
field of competition, based on the experiences gained in the actual functioning of the CCI over
the recent years.

The Competition Act intended to promote equal distribution of power in the economy of the
country and to prohibit the concentration of economic power and wealth. It was enacted to
provide the procedure for the formation of a commission to prevent practices which affect
adversely on competition, and to promote a sustainable competition in the business structure and
the economic system of the country by ensuring freedom of trade conducted by other existing
and probable competitors in the market and to protect consumer’s interest and provide good
services to them.
BIBLIOGRAPHY

Statutes Referred

1. Competition Act, 2002

2. Monopolistic and Restrictive Trade Practices Act, 1969

Books Referred

1. ANAND SINGH, COMPETITION LAWS IN INDIA, 2007.

2. VERSHA VAHINI, INDIAN COMPETITION LAW, 2016.
3. RAVI KARAN SINGH, RESTRICTIVE TRADE PRACTICES AND PUBLIC INTEREST, 1989.
4. PRADEEP S. MEHTA, A FUNCTIONAL COMPETITION POLICY FOR INDIA, 46 (2006).

Articles Referred

1. Vijay Kumar Singh, “Competition Law & Policy in India: The Journey in a Decade”
NUJS Law Review (2016).
2. Aditya Bhatacharjea, “Amending India’s Competition Law,” ECONOMIC & POLITICAL
WEEKLY (2006).
3. Sahithya Muralidharan and Chaitanya Deshpande, “Scope for intersection between
antitrust laws and corporate governance principles vis-à-vis cartels deterrence in India”
NUJS Law Review (2017).