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MRTP Act
MRTP Act
INTRODUCTION
The Monopolies and Restrictive Trade Practices Act (MRTP Act) was passed
by Parliament of India on 18 December 1969 and got president’s assent on
December 27, 1969, but it came into force from June 1, 1970.
India, in its formative years of freedom, laid down the seeds of socialistic
approach towards economic development. Five-year plans were designed with
the aim of self-realance and self-sufficiency of the Indian industry and in this
process of indigenuity, focus was laid on strong governmental regime to ensure
equal and prosperous distribution of resources. One such attempt of the state
resulted in the enactment of the MRTP Act, 1969 with the basic aim of
comprehensive control over direction, pattern and quantum of investment to
ensure that wealth is not concentrated in the hands of the few.
However, with the emergence of the new Industrial Policy statement of 1980, a
need was felt for promoting competition in domestic market, technological
upgradation and modernization which was then followed by the massive New
Policy Reforms of 1991 which emphasized attainment of technological
dynamism and international competitiveness, by opening up the Indian
economy to foreign investment. This could not be met by the Indian industry
since it was not in competitive terms with the rest of the world and operated in
an over-regulated environment. Hence, as was concluded in the Raghavan
Committee Report, 2000. changes were sought in the competition policies of
India and thus, the MRTP Act was laid to rest.
The previous industrial policies had clearly not worked in the direction the state
had hoped for since, post-independence many new and big firms had entered the
Indian market and they had little competition and thus, were trying to
monopolize the market.
Hence the need for a stricter policy regime was realised to safeguard the welfare
of the consumers by removing barriers to competition in the Indian economy,
and this resulted in the enactment of the MRTP Act, 1969 which came into
force in June 1970. The primary objectives of the Act were listed down in the
Preamble as follows:
i) Regulate the concentration of economic power to the common detriment,
ii) Control monopolies and monopolistic trade practices,
iii) Prohibit restrictive trade practices, and
iv) Regulate unfair trade practices.
Stringent provisions
The Act aimed at abolishing all acts which were anti-competition. The
Act, over the years became very active in taking on firms head-on to
make them stand in line with the provisions of the Act. The provisions,
though aimed at benefitting the consumers and the industrial growth,
often played out tough- and the stringent provisions did not benefit
anyone.
For instance, the concept of 'Predatory Pricing', which is still a marketing
policy adopted by companies to have an edge over their competitors, was
handed down heavily by the MRTP Commission. Predatory Pricing is
defined as pricing a good or service below the cost of production of the
good or service, with the objective of driving a competitor out of trade or
to discipline him and thereby achieve elimination of competition. This is
a means for a firm with strong market power to eliminate other
competitors and then, dominate the market.
This is effectively an anti-competitive mechanism; however, it can also
be used to drive competition i.e. it can be effectively used to establish a
strong competitive market. Examples are ripe in the current market where
there are strong competitive conditions for the firms- they have to dole
out quality at the best price to keep themselves established in the market,
otherwise other competitive firms will drive them out of business.
Examples being:
Tata Docomo, a mobile service provider that rolled out only 2 years back
in the Indian market, entered at a time when there were established
players in the market like Airtel, Reliance and state-run BSNL. But
Docomo with its pricing policy which was unlike the prevailing market
conditions, offered calling rates which changed the pulse. The market
prior to the arrival of Docomo was based on per/minute charges, but
Docomo came up with a per/second policy- thus, forcing other
established players to also offer similar rates. Though such strategy was
predatory in nature, but it helped in establishing a more competitive
market which only went onto help the customers.
Thus, the point that the researcher is trying to drive home is that such
predatory pricing is not necessarily anti-competitive but rather an agent to
bring about better options for the consumer. Hence, this is more
beneficial in terms of consumers' welfare.
Ambiguity in law
The MRTP Act, 1969 contained only one particular section, Section 2(o)
to cover all anti-competition practices- defining Restrictive Trade
Practice as a trade practice which prevents, distorts or restricts
competition and thus, by defining it in such broad terms that it was then
believed that there is no need for a new specific law or provision to
govern such practices. While complaints relating to anti-competition
practices could be tried under the generic definition of restrictive trade
practice, the absence of specific identifiable anti-competition practices
gave room to different interpretations by different Courts of Law which
resulted in the true meaning getting lost. While a generic definition might
be necessary and might form the substantive foundation of the law, it is of
great essence that there be a stronger specific legislation to cover all
possible aspects of abuse of market position.
Furthermore, some of the anti-competition practices like cartels, bid
rigging and other practices are not specifically mentioned in the MRTP
Act but the MRTP Commission, over the years, had attempted to fit such
offences under one or more of its sections by way of interpretation of the
language used therein.
International norms
Post 1991 and the WTO Regime, the MRTP was exposed to lack the
resources to handle the incoming international investments or to meet the
trade requirements of the WTO. The Act was amended in many ways to
accommodate for the New Policy Reforms of 1991 however such
amendments could not bring it at par with the other anti-competition
regimes in the World