A brief outline of the MRTP Act - Part II

Posted 15 October 2002 - 9:30am by businessgyan

Editiorial Team

Monopolistic Trade Practice (MTP).

The MRTP Act defines a MTP to be a trade practice, which has or is likely to have the effect of either; a) maintaining the prices of goods or charges for the services at an unreasonable level by limiting, reducing or otherwise controlling the production, supply or distribution of goods of any description or the supply of services or in any other manner; b) unreasonably preventing or lessening competition in the production, supply or distribution of any goods or in the supply of any services; c) limiting technical development or capital investment to the common detriment or allowing the quality of any goods produced, supplied or distributed, or any services rendered in India to deteriorate; d) increasing unreasonably (i) the cost of production of any good; or (ii) charges for the provision, or maintenance, of any services; or e) increasing unreasonably (iii) the prices at which goods are, or may be, sold or resold, or for the charges at which the services are, or may be provided; or (iv) the profits which are, or may be, derived by the production, supply or distribution of any goods (including the sale or purchase) or by the provision of any services. f) preventing or lessening 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. Once a trade practice falls under any one of the above categories, it would be presumed that the same is a MTP and is prejudicial to public interest, unless such trade

practice has been expressly authorized by law or the Central Government permits the carrying on of such practice. The MRTP commission has the power to inquire into the trade practice and if concludes that the trade practice is actually a MTP and is operating or is likely to operate against public interest, the Central Government has the power to require the person indulging in the trade practice to remedy the trade practice either completely or to the extent required by the Central Government. As a result, the Central Government could: a) Prohibit the continuation of the MTP completely; or b) Regulate the manner of production, storage, supply, distribution, or control of any goods or services by an undertaking and fixing the terms of their sale (including prices) or supply; or c) Prohibit any act or practice or commercial policy which prevents or could reduce the competition in the productio n, storage, supply or distribution of any goods or services; or d) Fix the standards for the usage or production of the goods; e) Declare as unlawful the execution or implementation of any specified agreement; f) Require either or all of the parties to any specified agreement to terminate the agreement either in whole or in part, within a time frame as stipulated by the Central Government; or g) Regulate the making or manner of utilization of profits as derived from the production, storage, supply, distribution or control of any goods or services; or h) Regulate the quality standards to be maintained for any goods or services. II. Resale Price:

The MRTP Act also provides for measures controlling/prohibiting the resale price for the sale or supply of goods in certain circumstances. It is to be noted that the resale price maintenance is not applicable to supply of services. Under the Act, there is also no prohibition on the assigning of a maximum price at which goods may be sold. Assigning of Minimum Price Any clause or term or condition in a contract for the sale of goods by a person to a wholesaler or retailer or agreement between a person and wholesaler or retailer or

relating to the sale of goods would be void if it either assigns or provides for the assignment of a minimum price to be charged upon the resale of goods in India. A supplier of goods who either directly or through any person or association of persons acting on his behalf is prohibited from either requiring its dealers or otherwise publishing in respect of any goods, a price which as stated or calculated could be understood to be a minimum price to be charged upon resale of the goods in India. Such a prohibition is also applicable to patented articles, which would include articles made by a patented process and articles made under a trade mark. However, this provision would not affect the term or conditions of a license granted by owner or licensor of any patent or trademark or for any assignment of the same, so far as it regulates the price at which the article may be sold by the licensee or assignee. Other Measures A supplier is not entitled to withhold the supply of any goods from any wholesaler or retailer who is seeking to obtain them for resale in India on the ground that such wholesaler or retailer has sold or is likely to sell the goods in India at a price which is below the resale price of the goods obtained from such supplier, or the wholesaler or retailer has supplied or is likely to supply such goods, either directly or indirectly, to a third party who has sold or is likely to sell the goods in India at a price which is below the resale price of the goods obtained from such supplier. However, the supplier could withhold supplies of the goods to any wholesaler or retailer or to cause or require other supplier to also withhold supplies, if he has reasonable cause to believe that the wholesaler or the retailer, has been or is reselling any goods of the same or a similar description whether obtained from that supplier or not, other than in genuine seasonal or clearance sale which is not for the purpose of making a profit on the resale of the goods, but for the purpose of attracting to his concern (where the goods are being sold), customers who would be likely to purchase other goods or for the purpose of advertising his business. Upon any person making an application to the MRTP Commission, the MRTP Commission can exempt goods of any class from the applicable prohibition or regulation for resale prices if the Commission is satisfied that the prohibition or regulation of such resale price would result in the detriment to the consumers by either: a) a reduction in the quality of the goods; or b) a increase in the price of the goods; or c) a reduction or cessation of the necessary after sale service of the goods

(The article was written by Ekta Bahl, a leading legal practitioner based out of Bangalore. Feedback can be mailed tomrtpc@businessgyan.com) Issue BG19 Oct02