UNIT II CHAPTER 2

Monopolies and Restrictive

Trade Practices Act, 1969

Meaning

The Monopolies and Restrictive Trade Practices

Act, 1969 is an economic legislation designed to
ensure that the operation of the economy does not
result in the concentration of economic power to the
common detriment.
The Monopoly law in India is based on the
presumption that big business not only harms
distributive justice but also results in monopolistic
tendencies.
Amendments made in 1991 are significant. With
growing complexity of industry and the need for
achieving competitive advantage in the international
market, the thrust of policies shifted to controlling and
regulating monopolistic, restrictive and unfair trade
practices.

Objectives of MRTP
Before the amendment to the MRTP Act in 1991,
the Act had two basic objectives, namely;
Regulation of monopolies and prevention of
concentration of economic power, and
Prohibition of monopolistic, restrictive and unfair
trade practices.
Post amendment, the objectives are:
Controlling monopolistic trade practices, and
Regulating restrictive and unfair trade practices.

Regulation of Trade Practices

The objectives are sought to be achieved

through the MRTP Commission- a body set up
by the government - empowered to inquire into
any monopolistic, restrictive and unfair trade
practices.
In relation to Monopolistic practices, the Central
Government can pass an appropriate order after
the Commission concludes that the operation is
against public interest.
The concept of public interest provides for the
prevention of concentration of economic power
and regulation of monopolistic, restrictive and
unfair trade practices.

MRTP Act, 1969

Regulation of

Monopolistic Trade
Practices
(MTPs)

Restrictive Trade
Practices
(RTPs)

Unfair Trade
Practices
(UTPs)

Monopolistic Trade Practices (MTPs)

In order to maximize profits, some business firms
tend to charge unreasonably high prices and
prevent competition by adopting deceptive
practices.
These business practices create monopoly, exploit
consumers and lead to economic imbalance in the
country.
Monopoly occurs when a dominant producer raises
prices or excludes competitors.
Sections 2(i), 10(b), 31, 32 and 37(4) of the MRTP Act
are exclusively devoted to monopolistic trade
practices.

Monopolistic Trade Practices (MTPs)

It is a trade practice which represents abuse of

market power in production of goods or services, by
charging unreasonably high prices, preventing or
reducing competition, limiting technical
development, deteriorating product quality or by
adopting deceptive practices.

MTP has been defined under section 2(i) of MRTP

(Amendment) Act, 1984 as follows:
Any trade practice which has or is likely to have the
effect of:

Monopolistic Trade Practices (MTPs)

Maintaining the price of goods at unreasonably high

level, by limiting, reducing or controlling production of
goods or services

Unreasonably preventing or lessening competition in

production of goods or services

Limiting technical development or capital investment to

common detriment or allowing the quality of goods
produced or services rendered to deteriorate

A trade practice is an MTP if it abuses market power or

adopts unreasonableness in any practice.

Monopolistic Trade Practices (MTPs)

Regulation of MTPs:

Where the Central Government understands that

the owners of enterprises are indulging in MTP, it
may refer the matter to MRTP Commission for
enquiry and report.
On the basis of report submitted, the Central
Government may pass an order for regulation of production and fixing terms of sale; or
prohibiting actions that restrict competition; or
fixing standards for quality of goods produced.

Monopolistic Trade Practices (MTPs)

Amendments to the Act:
The presidential order issued on Sep. 27, 1991
provides for the following amendments to the Act

The Director General Investigation and

Registration has been empowered to make
application to the Commission regarding MTPs.
Provision of penal punishment for contravention of
orders passed by the Commission.

Restrictive Trade Practices (RTPs)

It refers to certain trade practices that business

is often tempted to indulge in, which restrict,
reduce or prevent competition in the market,
thereby harming consumer interest.
The MRTP Act defines an RTP as any trade
practice which has or may have the effect of
preventing, distorting or restricting competition in
any manner and in particular which (i) tends to
bring about manipulation of prices or affect the
flow of supplies in the market or (ii) tends to
disrupt the flow of capital into the stream of
production.

Restrictive Trade Practices (RTPs)

RTPs may be adopted by manufacturers,

distributors, dealers, suppliers of goods or by
providers of service or by persons carrying on
profession or occupation.
RTPs could include tie-in sales, exclusive
dealing agreements, restriction on output or
supply of goods, control of the manufacturing
process, price control arrangements or any
practice recognized by the Government as a
restrictive trade practice.

Restrictive Trade Practices (RTPs)

Regulation of RTPs
The MRTP Commission is empowered to conduct
an enquiry into any RTP. If after enquiry it is found
that the practice is really restrictive and harms
public interest, the commission may, by order,
direct that;
-The practice be discontinued or never
repeated. This is called cease-and-desist order,
and
-The agreement shall be void and stand
modified in any such manner as specified in the
order.

MTPs and RTPs

Similarities:
Both MTPs and RTPs are detrimental to public
interest.
Both need enquiry by the Commission.
Temporary injunction can be issued by the
Commission in either case.
Compensation can be awarded in both cases to
any person as a result of the practice concerned.

MTPs and RTPs continued

Differences
MTPs
Stress is on
abusing market
power
Commission
conducts
enquiry either
on reference
from the Central
Government or
on its own
knowledge

RTPs
Stress is on preventing
competition
Commission conducts enquiry
either on (i) complaint from
25 or more consumers (ii) a
reference from the Central or
State Government (iii) the
application of the Director
General (iv) its own
knowledge

MTPs and RTPs continued

Differences
MTPs
The commission
submits its report to
Central Government,
who makes the final
order.
The Commissions role
is advisory, it can only
conduct enquiry.
Consequences of MTP
are more serious.

RTPs
The commission itself can
pass the final order after
enquiry.
The Commissions role is
not just advisory. It can
conduct enquiry as well
as make the final order.
Consequences of RTP are
not as serious as that of
MTP.

MTPs and RTPs continued

Differences
MTPs
The Director General
is required to
report compliance
with final order
within 90 days of
Government order.
Agreements relating
to MTPs need not
be registered.

RTPs
There is no such
requirement unless a
specific obligation is
imposed as part of the
Commissions order.
All agreements are
reqired to be furnished
for registration to
Director General.

Unfair Trade Practices (UTPs)

It is often believed that the consumer needs no
special protection and everything can be left to
market forces.
However, the perfectly competitive market is only a
myth.
In reality, products are of great variety and the
consumer has imperfect knowledge about them.
This allows the supplier to enjoy a dominant
position against the buyer.
Thus the consumer needs legal protection against
certain trade practices.

UTPs continued
Not just consumers, even the honest businessmen
require protection from dishonest competitors.
Several countries like Canada, USA have adopted
measures to control such unfair trade practices.
The need for such measures in India is much more
since majority of consumers are illiterate, illinformed and possess limited purchasing power.
Before the 1984 amendment, the MRTP Act had
no provisions to protect consumers from unfair
trade practices.

UTPs continued
Unfair practices could relate to deceptive
and misleading advertising or supply of
unsafe and hazardous products.
Sections 36A, 36B, 36C, 36D, 12A, 12B,
12C, 14 and 61 have been inserted in the
MRTP Act by the 1984 amendment and
such sections deal exclusively with unfair
and unethical practices and their
regulation.

UTPs continued
As defined by the MRTP Act, unfair trade practices
refer to any of the following five trade practices
which cause loss or injury to the consumer;
a) Misleading advertisement and false
representation
b) advertisement of bargain price (bait
advertising)
c) offering of pseudo (fake) gifts or prizes
d) supplying of unsafe or hazardous products, and
e) hoarding or destroying of goods, or refusal to
sell goods to increase price.

UTPs continued
For any practice to be termed as an UTP and for
action to be initiated by the MRTP Commission
the following conditions must be applied:
The practice must relate to any of the five
mentioned in the list above,
The practice must have been followed to
promote sale of a product/service, and
The practice has caused loss or injury to any
consumer.
However, since the 1991 amendment to the Act, it
is no more necessary for the consumer to prove
that he has suffered any loss or injury due to the
practice.

UTPs continued
The following are UTPs:
Misleading advertisement,
Falsely representing that goods and services are
of a particular standard or quality,
Falsely representing any second hand,
renovated or old goods as new,
Representing that goods or services have a
sponsorship, approval or affiliation which they do
not have,
Providing misleading representation concerning
usefulness of goods or services,

UTPs continued

False and misleading claims with respect to the

price of goods or services,
Hoarding or destruction of goods or refusal to sell
with the intention of raising prices,
Offering of gifts, prizes with the intention of not
providing them,
Giving an impression that something is offered free
when it is fully or partly covered by the amount
charged,
Giving false or misleading facts disparaging the
goods, services or trade of another person or
concern, and
Giving any warranty, guarantee of performance that
is not based on an adequate test.

UTPs continued
Regulation of UTPs:
The MRTP commission may conduct enquiry into
any UTP;
Upon receiving complaint from any consumers
association having more than 25 members,
Upon reference made by Central or State
Government,
Upon an application made by Director General,
Upon its own knowledge or information, and
According to 1991 amendment to the act, upon
an application made by any member of the public

UTPs continued
Regulation of UTPs:
If the enquiry of the Commission proves that an
enterprise is involved in UTP which is
detrimental to public interest, it may direct
that;
The practice shall be discontinued or shall
not be repeated, and
Any agreement relating to such UTP shall be
void and shall stand modified as specified by
the Commission.

MRTP Act
The Act shall not apply to any undertaking owned or
controlled by;
A Government Company,
The Government, and
A Corporation established under Central, State or
Provincial Act.
The machinery for enforcement of provisions of MRTP
Act consists of;
The MRTP Commission,
The Director General Investigation and Registration,
The Central Government, and
The Supreme Court.

Exercises
Classify the following trade practices as
monopolistic, restrictive or unfair:

Mr. Praveen runs an enterprise manufacturing

mobile phones. However, he tries to sell them
without the requisite quality check. Further, he
claims that they have been tested and fulfill the
quality criteria.

Unfair trade practice

Mr. Sachin owns and manages an enterprise

manufacturing washing machines. He wishes
to maximise his profits by pricing his goods at
an unreasonably high level.

Monopolistic Trade Practice

Mr. Arvind is a trader dealing in electronic

goods. He specialises in the sale of
televisions. However, he puts forward the
condition that people who wish to purchase
T.V must also purchase DVD from him.

Restrictive Trade Practice

Mr. Ravi runs a book publishing firm. He had set

himself huge targets for sales each year and
tried to achieve them at any cost. In the spree to
sell maximum number of books, he printed them
by compromising on quality.
Monopolistic trade practice

Mr. Dilip manufactures office furniture. At times,

he used to sell furniture through exchange
offers. But, he used to make minor adjustments,
polish them and sell them in the market as new
furniture.
Unfair trade practice