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The MRTP act is no longer active in India as it has been replaced by the Competition Act which came into effect on September 1st, 2009 by the Competition Commission of India.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:
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:
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:
eliminated or prevented competition
Took advantage of their monopoly by charging consumers with unreasonably high prices.
Deteriorated the quality of products
Limited technical development
Adopted unfair trade practices
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.
Unfair Trade Practices - Unfair trade practices are comprised of:
A false representation of second-hand goods and new goods.
Misleading representation of the quality of goods, their style, usefulness, need, standard, etc.
False claims or representation on the price of goods and services
False warranties and guarantees on goods and services without performing adequate testing on the product.
False facts are given regarding affiliation, sponsorship, etc.
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.
Hopefully, this article has extensively explained the MRTP act India, its features and objectives in a detailed manner.