Competitive Environment with reference to MRTP Act

After India attained independence in 1947, many new and big firms entered the Indian
market. At that time these companies had very little competition and they tried to monopolize
the market. The Government of India understood what was happening in the business
scenario and to safeguard the rights of consumers the government passed the MRTP bill in
1969.
MRTP full form is Monopolistic and Restrictive Trade Practices and it is an important yet
extremely controversial piece of economic legislation. The MRTP bill was passed in 1969
and the MRTP act India came into full force from 1st June 1970. This act has seen many
amendments in the subsequent years (1974, 1980, 1982, and 1991). This act is applicable to
all the states in India except Jammu and Kashmir.
The MRTP act is no longer active in India as it has been replaced by the Competition Act
which came into effect on September 1st, 2009 by the Competition Commission of India.
Here in this article, we will learn about the salient features of the MRTP Act, the objectives of
the MRTP Act, what all did this act aim to regulate, and the difference between the MRTP Act
and the Competition Act. We have also provided this article in pdf format so that you could
download the MRTP act 1969 pdf to refer to it on the go, as and when you need it.
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What is the MRTP Act?

Monopolistic trade practices mean dominant trade practices where a firm or an oligopolistic
firm consisting of a set of 3 companies reach a dominant position in the market. They are
then able to control the market by eliminating competition or regulating prices and the output
of products.
Restrictive trade practices occur by joint action of a group of two or more organizations to
avoid market competition, irrespective of market share. Such practices are seen as prejudicial
to public interests.
The MRTP act was the first substantial legislation with the goal of regulating free and
unfettered trade. This act was geared towards ensuring distinction between restrictive and
monopolistic trade practices.
From 1977 the Sachar committee was appointed by the government to ensure mandatory
review of the MRTP act. The committee also made sure there were mandatory
recommendations for streamlining its activities.
The initial objectives of the MRTP Act are mentioned below:
 The law made sure that the economic power does not get concentrated into the hands
of a few companies.
 To provide for monopolies control
  Regulation of monopolistic and restrictive trade practices.
There was an amendment in 1984 that introduced the 4th objective of the act:
 Regulation of unfair trade practices.
After the final amendment in 1991, the objectives of the MRTP act stood as described below:
 MTP - Prohibition of Monopolistic Trade Practices
 RTP - Prohibition of Restrictive trade practices
 UTP - Prohibition of Unfair Trade Practices

Elaboration on the Trade Practices that the MRTP Act Regulated

There are three types of trade practices regulated by the MRTP act:
1. Monopolistic Trade Practices - This refers to the misuse of one’s hold in the market
to abuse the market with respect to the production and sale of commodities and
services. As part of this practice companies:
a. eliminated or prevented competition
b. Took advantage of their monopoly by charging consumers with unreasonably
high prices.
c. Deteriorated the quality of products
d. Limited technical development
e. Adopted unfair trade practices
2. Restrictive Trade Practices - In order to gain power in the market and maximize
their profits traders often indulged in activities that blocked the flow of capital into
production. These traders also affected supply by bringing in conditions for delivery
which in turn gave rise to unjustified costs.
3. Unfair Trade Practices - Unfair trade practices are comprised of:
a. A false representation of second-hand goods and new goods.
b. Misleading representation of the quality of goods, their style, usefulness, need,
standard, etc.
c. False claims or representation on the price of goods and services
d. False warranties and guarantees on goods and services without performing
adequate testing on the product.
e. False facts are given regarding affiliation, sponsorship, etc.

MRT Commission
To carry out this act, the government established the following:
 A commission consisting of a minimum of two and a maximum of eight members.
 The chairman of this commission had to be qualified to be a supreme court or high
court judge (for a state).
 Members of this commission possessed adequate knowledge and experience or have
shown capabilities in handling issues related to law, economics, commerce, industry,
accounting, or public affairs.
 The office period of members of the commission could not exceed 5 years.
 During the inquiry before the commission, the DG (Director General of Investigation
and Registration) assisted the commission in carrying out the investigation,
maintaining a register of agreements, and undertaking carriage of proceedings.

The Competition Act, 2002

 The Competition Act, 2002 is a law that governs commercial competition in India. It
replaced the erstwhile Monopolies and Restrictive Trade Practices Act, 1969.
 The Competition Act aims to prevent activities that have an adverse effect on
competition in India.

 History of the Competition Act, 2002

 The Monopolies Inquiry Commission was established in April 1964 under Justice KC
Das Gupta, a Supreme Court judge. The objective of the commissions was to inquire
about the effect and extent of monopolistic and restrictive trade practices in important
sectors of the Indian economy.
 The Monopolies and Restrictive Practices Act of 1969 was enacted to limit the
concentration of wealth in a few hands and limit monopolistic practices, but it was too
archaic in its definitions of what is a ‘monopolistic practice’. Thus, it was decided that
a new law governing competition in India was required.
 Keeping the above purpose in mind the Competition Act was introduced in Lok
Sabha on 6 August 2001.


Definitions under the Competition Act

 The following are the definitions cited under the Competition Act 2002:
 1. Acquisition: Acquisition is defined as the direct or indirect agreement to acquire
shares, voting rights or control of assets over any enterprise.
 2. Cartel: A cartel is defined as an association of producers, sellers who limit control
distribution, sale or promotions on goods through an arrangement previously made.
 3. Position: A dominant position means a position of power held by an enterprise in
the related market. It enables the enterprise to function freely and influence the market
to its directions.
 4. Predatory pricing: Predatory pricing is where the price of goods and services is
reduced to well below the cost of production in order to eliminate competition.
 5. Rule of reason: The interpretation of activity on the basis of business justification,
market impact on competition and on the consumer.

Salient Features of Competition Act 2002

 The following are the features of the Competition Act 2002:

 1. Anti Agreements: Any individual or enterprises shall not deal in production supply
or distribution that may cause a negative impact regarding competition in India. Any
existence of such agreements is considered illegal.
 2. Abuse of dominant position: In the event, an enterprise or an associated individual,
it is found to indulge in practices that are unfair or discriminatory in nature shall be
considered an abuse of dominant position. If a party is found to be in abuse of its
position, then they will be subjected to an investigation from the concerned
authorities.
 3. Combinations: As per the act a combination is defined as terms which lead to
acquisitions or mergers. But should such combinations cross the limits as put forth by
the Act, then the parties involved would be under the scrutiny of the Competition
Commission of India.
 4. Competition Commission of India: The Competition Commission of India is an
independent body with the powers to enter into contracts and should the contracts be
broken they can sue the parties involved. The Commission consists of a maximum of
six members who are tasked with sustaining and promoting the interests of consumers
in order to foster an ideal environment for economic competition.

Key provisions of competition act

. Anti-Competitive Agreements (Section 3)
This provision prohibits any agreement between enterprises or associations that causes
or is likely to cause an appreciable adverse effect on competition (AAEC) in India.
These include agreements that directly or indirectly determine purchase or sale prices,
limit or control production or supply, share markets or customers, or result in bid
rigging and collusive bidding. Such agreements are considered void. Both horizontal
agreements (between competitors) and vertical agreements (between producers and
distributors) are covered under this section. Certain vertical agreements like exclusive
supply, tie-in arrangements, and resale price maintenance are also scrutinized for their
effect on market competition.

🔹 2. Abuse of Dominant Position (Section 4)

Section 4 prohibits any enterprise or group from abusing its dominant position in the
market. A dominant position refers to a company’s ability to operate independently of
competitive forces or affect competitors, consumers, or the market in its favor. Abuse
may include imposing unfair or discriminatory prices, limiting or restricting
production or technical development, or denying market access to others. Predatory
pricing—selling below cost to eliminate competitors—is a common example of abuse.
The law aims to ensure that market dominance is not used unfairly to suppress
competition or exploit consumers.

🔹 3. Regulation of Combinations (Section 5 & 6)

The Act regulates mergers, acquisitions, and amalgamations, collectively called
"combinations", that cross certain asset or turnover thresholds. The purpose is to
prevent combinations that may lead to a significant reduction in competition in the
market. Section 5 defines what qualifies as a combination, and Section 6 prohibits
combinations that have or are likely to have an appreciable adverse effect on
competition. Parties to such combinations must notify the Competition Commission of
India (CCI) and obtain prior approval. This ensures that market concentration does not
harm the competitive landscape.

Functions of the Competition Commission of India (CCI)

The Competition Commission of India (CCI) is the statutory body established under
the Competition Act, 2002 to prevent practices that have an adverse effect on
competition and to promote a healthy and fair competitive environment in the Indian
economy.

🔹 1. Elimination of Anti-Competitive Practices

One of the primary functions of the CCI is to inquire into and eliminate anti-
competitive agreements and abuse of dominant positions. It has the authority to
investigate businesses and pass orders if such practices are found. The Commission
ensures that agreements or market behaviors that restrict competition, such as cartels
or price-fixing arrangements, are penalized and discouraged.

🔹 2. Regulation of Combinations
CCI examines mergers, acquisitions, and amalgamations—collectively referred to as
combinations—to assess whether they may result in an appreciable adverse effect on
competition (AAEC). If a combination is likely to harm market competition, CCI can
prohibit or impose conditions on it. This function ensures that large corporate mergers
do not lead to monopolies or market dominance.

🔹 3. Consumer Protection
The Commission works to protect the interests of consumers by ensuring that they
have access to a variety of products at competitive prices. By curbing unfair trade
practices and maintaining a competitive market, the CCI indirectly ensures better
quality and more choices for consumers. This aligns with the Act’s objective of
consumer welfare.

🔹 4. Promoting and Sustaining Competition

The CCI actively promotes competition by encouraging the adoption of fair trade
practices and discouraging market manipulation. It ensures that markets remain open
and accessible to all players, big or small. By preventing the abuse of dominant
positions and ensuring fair market conditions, it supports economic efficiency and
innovation.

🔹 5. Advisory Role to Government and Statutory Authorities

Under Section 49 of the Act, the CCI can advise the Central or State Government
or any statutory authority on competition-related matters upon request. It may also
give its opinion on policy frameworks and economic regulations that might affect
competition in the market.

🔹 6. Competition Advocacy and Awareness

The CCI engages in advocacy efforts to create public awareness about the benefits
of competition. It organizes seminars, publishes research, and works with industry
stakeholders, educational institutions, and the general public to spread knowledge
about competition law. It also collaborates with international organizations on
competition policy matters.

🔹 7. Conducting Market Studies and Research

CCI conducts market studies and research to understand the competitive dynamics
of various sectors. These insights help the Commission to make informed decisions,
update policies, and recommend reforms in areas prone to anti-competitive conduct.