Monopolistic and Restrictive Trade Practices (MRTP) Act

About 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The MRTP act is no longer active in India as it has been replaced by the Competition Act which came into effect on September 1st, 2009 by the Competition Commission of India.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:

    1. eliminated or prevented competition

    2. Took advantage of their monopoly by charging consumers with unreasonably high prices.

    3. Deteriorated the quality of products

    4. Limited technical development

    5. 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:

    1. A false representation of second-hand goods and new goods.

    2. Misleading representation of the quality of goods, their style, usefulness, need, standard, etc.

    3. False claims or representation on the price of goods and services

    4. False warranties and guarantees on goods and services without performing adequate testing on the product.

    5. 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.


Conclusion

Hopefully, this article has extensively explained the MRTP act India, its features and objectives in a detailed manner. 

FAQs (Frequently Asked Questions)

Q1. What were the major parts of the MRTP act that the government followed?

Ans: MRTP had two major parts which the government carried out as follows:

  1. The companies must get approval from the central government for expansion, diversifications, the establishment of new undertakings, mergers, and amalgamations.

  2. There could be exceptional cases where a government could enforce an industrial undertaking to get divided into many smaller divisions.

Q2. What are the differences between the MRTP act and Competition Act?

Ans: In 2002 MRTP act was revoked and replaced by the Competition act. The competition act forced the focus of the MRTP act (curbing monopolies) to promote competition since the MRTP act had a few limitations. Both the acts are applicable to all the Indian states except J&K. The chart below summarizes their differences:


Parameter for comparison

MRTP Act

Competition Act

goals

MRTP act was made to form rules for regulating unfair trade practices and monopolies in business.

The Competition Act’s main aim is to promote competition in the economy and maintain freedom of business.

Dominance

This is determined by the size of the firm.

This is determined by the structure of the fir,

Nature

Reformatory

Punitive

Focussed on

Consumer interest at large

Public at large

Number of Offenses

14 offenses

4 offenses

Penalty

No penalty for any offense

Penalty for offenses

Agreement

Registration required

There is no provision related to registration or regulation.

Q3. Which companies fell under the umbrella of MRTP companies?

Ans: Any organization which had an asset of INR 25 crore and above were called MRTP companies or businesses. They were obliged to take permission from the authorities of India. The limit of INR 25 crores was referred to as the MRTP limit. 

Q4. What was the procedure for carrying out a complaint under the MRTP Act?

Ans:

The process of carrying out an MRTP act complaint was:

  • A complaint is filed and the DG of the MRTP Act carries out an investigation to find out the facts of the case.

  • The complaint is dismissed if no prima facie case is made.

  • If the complaint is found to be true, an order was passed to its effect.

  • The commission restricted and restrained the guilty party from carrying on such practices by granting a temporary authoritative warning.

  • The final order is passed where the complainant might be compensated for his or her loss.

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