Overview
The session explains the MRTP Act, 1969, its objectives and enforcement, and why it was replaced by the Competition Act, 2002. It outlines key provisions of the Competition Act, including prohibited agreements, abuse of dominance, and regulation of combinations.
Background and Evolution
- Big industries gained monopoly power, prompting government action to curb dominance.
- MRTP Act passed on 18 December 1969; came into force on 1 June 1970, per Dutt Committee.
- Applied across India except Jammu and Kashmir.
- Amendments occurred in 1982, 1984, 1985, and 1991.
- S. Raghavan Committee formed in 1999; reported in 2000; basis for Competition Act, 2002.
- Competition Act, 2002 replaced MRTP Act; applied across India except Jammu and Kashmir.
- Competition Commission established on 14 October 2003 to implement the Competition Act.
MRTP Act, 1969: Objectives and Enforcement
- Objective 1: Prevent concentration of economic power to the common detriment.
- Objective 2: Control monopolistic, restrictive, and unfair trade practices against public interest.
- MRTP Commission: Enforcement agency to inquire into complaints and report to the central government.
Prohibited Practices under MRTP Act
- Monopolistic Trade Practices:
- Misuse production and sales power to eliminate competition; charge unreasonably high prices.
- Deteriorate product quality; limit technical development; avoid R&D investment.
- Unfair Trade Practices:
- False representation and misleading advertisements for goods and services.
- Misrepresent usefulness, need, quality, standard, style; sell second-hand as new.
- Restrictive Trade Practices:
- Practices that restrict or reduce competition in the market.
Competition Act, 2002: Objectives
- Promote healthy competition in the Indian market.
- Prevent practices having adverse effect on competition.
- Protect interests of traders and consumers appropriately.
- Ensure freedom of trade across the Indian market.
- Prevent abuse of dominant position in the market actively.
- Regulate operations and activities of combinations (mergers and acquisitions).
- Create awareness and provide training about the Act.
Competition Act, 2002: Core Scheme
- Prohibition of anti-competitive agreements (Section 3).
- Prohibition of abuse of dominant position (Section 4).
- Regulation of combinations (Section 5).
Key Provisions by Section
- Section 3: Anti-competitive Agreements
- No enterprise or association may enter agreements on production, supply, distribution, storage, acquisition, or control of goods or services that cause or likely cause appreciable adverse effect on competition.
- Any agreement contravening Section 3(1) is void under Section 3(2).
- Section 4: Abuse of Dominant Position
- No enterprise shall abuse its dominant position.
- Holding dominance is not prohibited; misuse of dominance is prohibited.
- Section 5: Regulation of Combinations
- No person or enterprise shall enter combinations likely to cause appreciable adverse effect on competition in the relevant market.
- Combinations are void only if they adversely affect competition.
MRTP Act vs. Competition Act: Comparison
| Aspect | MRTP Act | Competition Act, 2002 |
|---|
| Meaning/Purpose | First competition law; focused on unfair trade practices | Promote and maintain competition; ensure freedom of business |
| Nature | Reformatory (cease and desist) | Punitive (includes punishment) |
| Dominance Basis | Based on size of firm | Based on sales |
| Focus | Protect consumer interest | Focus on public at large |
| Offences Count | Fourteen offences | Four offences |
| Penalties | No penalties; stop or change practice | Penalty provisions exist |
| Core Objective | Control monopolies | Promote competition |
| Chairman Appointment | MRTP Commission chairman by central government | Competition Commission chairman from retired judges or specialists |
Key Terms & Definitions
- Monopolistic Trade Practice: Misuse of market power to eliminate competition and charge high prices.
- Unfair Trade Practice: False representation or misleading advertisement about goods or services.
- Restrictive Trade Practice: Any trade practice that restricts or reduces competition.
- Dominant Position: Strong market power; not illegal unless abused.
- Combination: Mergers or acquisitions; regulated when affecting competition adversely.
Action Items / Next Steps
- Review practice questions shared at the end of the session for reinforcement.
- Revisit Sections 3, 4, and 5 for clarity on prohibitions and criteria.