COMPETETION LAW PRESENTATION

SUB: MRTP ACT

SUBMITTED BY:
ROHINDEEP PJ
ROLL NO: 202120034
TO:
PROF. ARIFA ZAHRA
SOL, PRESIDENCY UNIVERSITY
20/01/2022
 INTRODUCTION

Since attaining Independence in 1947, India, for the better part of half a century
thereafter, adopted and followed policies comprising what are known as
“Command-and-Control” laws, rules, regulations and executive orders. The
competition law of India, namely, the monopolies and Restrictive Trade Practices
Act, 1969 (MRTP Act, for brief) was one such. It was in 1991 that widespread
economic reforms were undertaken and consequently the march from
“Command-and-Control” economy to an economy based more on free market
principles commenced its stride. As is true of many countries, economic
liberalisation has taken root in India and the need for an effective competition
regime has also been recognised.
In the context of the new economic policy paradigm, India has chosen to enact a
new competition law called the Competition Act, 2002. The MRTP Act has
metamorphosed into the new law, Competition Act, 2002. The new law is
designed to repeal the extant MRTP Act. As of now, only a few provisions of the
new law have been brought into force and the process of constituting the
regulatory authority, namely, the Competition Commission of India under the new
Act, is on. The remaining provisions of the new law will be brought into force in a
phased manner. For the present, the outgoing law, MRTP Act, 1969 and the new
law, Competition Act, 2002 are concurrently in force, though as mentioned above,
only some provisions of the new law have been brought into force.
A commission known as the Monopolies and Restrictive Trade Practices
Commission was established under MRTP act, 1969. The MRTP Act, 1969 also
provides for appointment of a director General of Investigation and Registration
for making investigations for the purpose of enquiries by the MRTP Commission
and for maintenance of register of agreements relating to restrictive trade
practices.
The History of Competition Law & International
Enforcement

Emperors, rulers and governments in different countries tried for years to

regulate competitive markets by stabilizing prices and supporting local
productions using tariffs which gradually leads to the modern competition or
antitrust laws around the world. Laws related to competitive markets are found
in over two millennia of history.

The earliest efforts to control price fluctuations and unfair trade practices can
be traced back to the Indian and Roman civilizations. Competition is “a situation
in a market in which firms or sellers independently strive for the buyers’
patronage in order to achieve a particular business objective for example,
profits, sales or market share” (World Bank, 1999). Competition Law is
structured to promote and provide a fair chance for healthy competition
between contending competitors in the market and to protect the consumer’s
interests.

The earliest ancient example of modern competition law’s ancestors is Lex Julia
de Annona, during the Roman Republic around 50 BC. To protect the corn trade,
heavy fines were imposed on direct, deliberate and insidious attempt to stop
supply ships. The study of competition began formally in the 18th century by
using different terms to describe this area like restrictive practices, the law of
monopolies, combination acts and the restraint of trade in works like Adam
Smith’s The Wealth of Nations.

European rulers and legislators repeatedly cracked down on monopolies in the

middle ages. The end of the 19th Century saw a number of laws being enacted in
the United States of America to restrict monopoly in business practices,
popularly known as anti-trust laws. The doctrine of restraint of trade in English
common law leads to modern competition law and the United States antitrust
statutes, which in turn had great influence on the development of European
community competition laws after the World War II.

Increasingly the focus has moved to international competition enforcement in a

globalized economy. The Treaty of the European Community (EC Treaty of
Rome) was signed by six Western European countries in 1957. Modern
competition law begins with the Sherman Act of 1890 and the Clayton Act of
1914 in the United States.

Competition law has been substantially internationalized and the US model is

followed globally. Presently recommendations about the competition law for
the neo-liberal business economy are being made by two internationally famous
organization for the world economy –

(i) The United Nations Conference on Trade and Development [UNCTAD]

(ii) The Organisation for Economic Co-operation and Development [OECD]

At present more than 90 countries have Competition Laws.

Provision of Constitution Leading to the Enactment of MRTP

Act 1969

India has had a history of competitive markets. Kautilya‟s Arthashastra, deals

with statecraft and economic policy. Articles 38 and 39 of the Constitution of
India mandate that the government shall secure and protect the society where
people will get social, economic and political justice and it shall address all the
organizations of the nation, and the State shall direct its policy as-
 1) The ownership and control of material resources are so distributed as
best to assist the common good.
2) The economic system does not operate as it creates a concentration of
wealth and means of common detriment.
The MRTP Act was in consequence of the above mentioned prevention of
concentration of economic power which is the mandate in the Directive
Principles of the Constitution of India. India adopted a planned economic
development strategy since independence.
India chose a centrally planned economic structure also referred to as the
Nehruvian socialism model. The Nehruvian model was a mixed economy model
– a model that was neither a market economy like the United States of America
nor a socialist economy like it was then in the USSR.

Under the mixed model, both the private and public sector co-existed. Since
independence of the country in 1947, India adopted and followed policies
comprising ‘command and control‘ laws, rules, regulations and executive
orders. The Industrial Policy Resolution of 1948 and 1956 emphasized the state
role in the industrial development, growth, social justice as a regulator by
defining the parameters of regulatory mechanism.

Industrial (Department and Regulation) Act (IDRA), 1951 empowered the

government to regulate almost every aspect of the functioning of the private
sector. The private sector was allowed limited licensed capacity in the core
sector and public sector were patronized to achieve growth and development of
core industries like coal, oil & natural gas , iron & steel, power & energy etc.

It evolved a market where there was no such contestable competitor as the

state controlled almost all areas of economic activities and intervened every
step of the business process and financial actions of the private sector which
restricted its growth and favoured public sector companies.

The public sector companies were made responsible for the economic growth
of the country. Entry or exit was not easy for business. Interventions and
restrictions were everywhere for private companies– from plant size to site
location, from financial allocations to foreign investments.

Free competition in the market suffered a lot mainly because of Govt. policies–
it only favoured public sector and big business houses as they were in a position
to raise huge fund and avail technical and managerial supports to achieve the
skill to grow. High tariff and no proper licence allocating system established an
environment where big businesspersons succeeded in getting entry into the
industry and survive with no competition. This led to the concentration of
economic power in only a few individuals or business groups which created
monopolistic trade practices and License-Raj.

This compelled the Government to reform the Indian economy. The license raj
regime continued until the early 1990’s.The economic crisis faced by the country
led to economic reforms and initiation of the New Economic Policy (NEP) 1991
and the New Industrial Policy (NIP) 1991. Competition law became very
important than before in this new Liberalisation-Privatisation-Globalisation
(LPG) era.

Competition has been helping the Indian consumer and industry to provide
better public services since then. Greater competition boosted the Indian
economy to become one of the best performers in the recent years.
Competition has become a driving force in the Indian economy as an
environment is essential that facilitates fair competition, restrain
anticompetitive behavior and unfair trade practices.
EVOLUTION OF MRTP AS A COMPETETION LAW

Even before the Glasnost and globalization which took place in the early 1990s,
India took regulatory measures by means of an antitrust act named Monopolies
and Restrictive Trade Practices (MRTP) Act in1969.

From 1969 to 2003 Govt. provided the regulation to the monopolistic trade for
the first time by virtue of the enactment of this Monopolies and Restrictive
Trade Practices Act (MPTP Act) which inspired by the mandate of the Directive
Principles of State Policy in the Constitution of India. The Preamble of the MRTP
Act preached a socialistic philosophy intended to ensure that the operation of
the economic system did not led to the concentration of economic power to the
common detriment.

The Act advocated for the prohibition of Monopolistic and Restrictive Trade
Practices. However, it was not meant for all sectors of the economic system and
did not apply to the public sector, government undertakings and undertakings
by state & central Govt. corporation, banks , the State Bank of India and
insurance companies of India which restricted the scope of the Act. As a result,
the Parliament of India enacted Competition Act, 2002 in 2003. Competition Act
deals with anti-competitive agreements, abuse of a dominant position and a
combination or an acquisition.

Three enquiries conducted by three different committees acted as the loadstar

for the enactment of the MRTP Act . Those are-
 • The Committee under the chairmanship of Mr. Hazari studied licensing
procedure for the Industrial sector under the Industries (Development
and Regulation) Act, 1951.
• The Committee found that licensing system led to the disproportionate
growth of some big business houses (Hazari, 1965).
• In October 1960 a committee was set up which was chaired by Professor
Mahalanobis. The Committee enquired the distribution and levels of
income and came to a conclusion in February 1964 that the top 10% of
Indian population cornered almost
40% of the income and the big business companies were flourishing because of
the existence of country’s ‘planned economy’.

• The Government of India appointed ‘The Monopolies Inquiry Commission

(MIC)’ in April, 1964 which was chaired by Mr. Das Gupta. The Committee
researched about the monopoly practice in the industry and its impact on
the Indian economy. The Commission reported in October 1965 that
product wise and industry wise concentration of economic power existed
in the system due to large-scale restrictive and monopolistic trade
practices as a few business houses were operating a large number of
companies.
As a consequence of its findings, the Monopolies Inquiry Commission drafted a
Bill which was amended by a Parliamentary Committee and became the
‘Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act)’ and was
enacted from 1st June, 1970.

The MRTP Act intended to protect consumers as well as to avoid concentration

of wealth and aimed to prevent- (a) Concentration of economic power
(b) Prohibition of monopolistic, unfair or restrictive trade
Economic Reforms and its Impact on the MRTP Act

The MRTP Act became ineffective for different reasons. For example– the
frequently changing industrial policy of Indian Government. Major amendments
to MRTP Act was undertaken in –

(i) 1984 – major addition was relating to Unfair Trade Practices

(ii) 1991 – deletion of chapter relating to Mergers and Acquisitions and
Addition relating to Award of Compensation
The monopoly of the public sector was abolished in 1991. For example- licensing
had been abolished and opened for the private sector in 6 core industrial
sectors like steel, heavy electrical equipment, aircraft, air transport,
shipbuilding, telecommunication equipment and electric power were made
open for private sector investments.

Some difficulties arose while practicing and implementing MRTP Act were as
follows –

• Lack of clarity on various definitions and interpretations – the Act neither

define nor even mention certain trade practices which are restrictive in
character. Such as- abuse of dominance, cartels, collusion and price fixing,
bid rigging, boycotts and refusal to deal, predatory pricing etc.

• Discrimination between public and private sector – in spite of being a

competition law, the MRTP Act could not be effective in the absence of
the element of competition. For example, the protection and favour
offered in pricing and purchase preferences to public sector, hampered
competition where the private companies were also operating in the
market without getting any favour from the Govt.
Upon realization of the necessity for review of the MRTP Act, the government
appointed a high-powered expert committee chaired by Justice Rajinder Sachar,
in June 1977 to consider and suggest suitable changes. The Sachar Committee
presented a report to the Government in August , 1977.

• The LPG Paradigm – after the economic reforms in 1991, there had been a
subsequent change in the economic scenario with the effects of
liberalization, privatization and globalization, which impelled the need for
a new competition law.
As a result of adopting liberalization, India accepted and agreed to two
important agreements of the World Trade Organization namely General
Agreement on Tariffs and Trade (GATT) and Trade Related Aspects of
Intellectual Property Rights (TRIPS). It led to the capability of multinational
companies to enter the Indian market which made the MRTP Act less important
and less effective and MRTP Commission under the MRTP Act realized that a
new legislation was needed.

The origin of a much needed new law lies in Finance Minister’s budget speech in
February, 1999 –

“The MRTP Act has become obsolete in certain areas in the light of international
economic developments relating to competition laws. We need to shift our focus
from curbing monopolies to promoting competition. The Government has decided
to appoint a committee to examine this range of issues and propose a modern
competition law suitable for our conditions.”

The Govt. of India constituted a High Level Committee on Competition Policy

and Competition Law, chaired by Mr. S V S Raghavan , a retired senior Central
Govt. officer (popularly known as ‘Raghavan Committee’) in October 1999 to
advise a new and effective contemporary competition law to cope up with the
international economic developments and to recommend a suitable legislative
framework, which may imply a new law relating to competition law for
necessary amendments in the MRTP Act,1969.

The Raghavan Committee considered between amending the existing MRTP Act
and enacting a new modern competition law. They agreed to the finance
minister’s view that the MRTP Act has become obsolete in certain areas in line
with the international economic developments relating to competition laws.

The amendments of MRTP Act would only be beneficial for curbing monopolies
and it wouldn’t be effective for the fair competition in the market economy. It
was perceived by the Raghavan Committee that drafting a new and modern
competition law suitable for Indian economy would be most beneficial for
promoting competition and suitable for dealing with issues of the competition
of the new liberal business atmosphere, which was the main focus of the Indian
Govt.

This led to the enactment of the Competition Act. The report of the Raghavan
Committee concluded in May 2000. The committee studied the government
strategies and policies and their effect on the Indian industrial system, the
insufficiencies and inadequacies of the Industry to compete with multinationals.

The major recommendations and suggestions submitted to the government

were:

1.To repeal the MRTP Act and to enact a new Competition Act for the regulation
of Anti-competitive agreements and to prevent the abuse of dominance and
combinations including mergers.
2.To eliminate reservation of products in a phased manner for the Small Scale
Industries and the Handloom Sector.
3.To divest the shares and assets of the government in state monopolies and
privatize them.
4.To bring all industries in the private as well public sector within the proposed
legislation.

Legislative Development & Metamorphosis from MRTP Act to

New Competition Law under the Light of New Competition
Policy
After recommendations of the committee, the Govt. of India consulted all
concerned stakeholder including the associations of trade and industry and also
the general public. On the basis of the recommendations of the Committee and
the suggestions from concerned parties, a ‘draft’ of competition law was
presented to the Government of India in November 2000 and the ‘Competition
Bill’ was introduced in the Parliament by the Government which was plotted
basically to restrain monopolies in the market with a modern new competition
law in synchronization with the established principles of competition law.

Bill was referred to the Parliamentary Standing Committee. After considering

the recommendations of the Standing Committee, the Parliament passed the
‘Competition Act, 2002′ in December , 2002 as the first step towards the
transformation from old obsolete laws to the neo-liberal economic condition
suited competition law.

The Competition Act received the assent of the President and it came into
existence on the 13th January, 2003. This Act was introduced as a replacement
to the MRTP Act under the provision in Section 55 of the Competition Act which
states the repeal of MRTP Act and for the transfer of cases of related matters to
the Competition Commission of India (CCI) .
Competition Commission of India (CCI) was established under the Competition
Act. (Sec.7) to regulate competition and to implement the Act. The government
notified rules and regulations to select the chairperson and other officials to
form the first ever Competition Commission of India ( CCI ) which was
established on the 14th October, 2003.

Competition Commission of India consists of a chairperson and six other

Members . Competition Commission of India(CCI) functions as a quasi-judicial
body and acts as a regulatory body to prevent and regulate anti-competitive
business practices in the country. The Competition Act is created by the central
government and parliamentary legislature and there is no equating state govt.
law. A competition appellate tribunal has also been established namely The
Competition Appellate Tribunal (COMPAT). After enactment of the Act, it was
subsequently amended in different times.

A. The Competition (Amendment) Act, 2007 was approved by the Parliament

of India in September 2007 and received assent from the President of
India on 24th September 2007. The validity of the commission was
challenged before the apex court of India in ‘Brahm Dutt Vs. Union of
India’ 2005, where the Government of India specified about amendments
and the Act was amended substantially. The amendment changed the
then existing regulatory infrastructure of the Competition Act
significantly. This amendment Act inter alia divided the competition
authority into two –

(i) The Competition Commission of India (CCI) would be an expert

administrative body which will function as collegium and as a
market regulatory authority to prevent anti-competitive
practices in the country and will function as an advisory body
and also have advocacy functions.
 (ii) The Competition Appellate Tribunal (COMPAT) to execute
adjudicatory functions as mentioned u/s 53A of the Act. And to
hear appeals against any counsel or directions made by the
Competition Commission of India. The orders or decisions of the
COMPAT can be challenged in the Supreme Court.

B. The Competition (Amendment) Act, 2009- The Commission notified the

provisions of the Competition Act relating to anti-competitive agreements
and abuse of dominant positions on 20th May , 2009 under the
Competition Act. For amendment of Section 66 of the Competition Act,
2002, an ordinance was issued by the President of India on the 14th
October, 2009 named as ‘The Competition (Amendment) Ordinance,
2009′.

The ordinance was replaced by the ‘Competition (Amendment) Bill, 2009′ which
was passed by the Parliament of India on 14th December, 2009 by the Lok Sabha
and on the 16th December, 2009 by Rajya Sabha. The Bill was converted into an
Act. As a result of the enactment of the Act, pending cases on which the
jurisdiction of MRTPC was to continue for 2 years after the repeal of the MRTP
Act will now have the jurisdiction of the Competition Appellate Tribunal in
accordance with the repealed MRTP Act.

The Competition Commission of India was established in October 2003.

However the operative provisions of the Competition Act would be brought into
force in two phases in May, 2009 and in June, 2011 respectively. In the 1st
phase, the anti-competitive agreement and abuse of dominance provisions
were notified. Subsequently, the combination provision was notified.