ABSTRACT:
The
Monopoly and Restrictive Trade Practice Act 1969 became obsolete in the present
world of throat cutting competition. The MRTP Act prevent the expansion of the companies
whose assets was 100 crores, because these companies need to take government permission to expand their business. So, there was a desperate
need to shift our focus from the monopoly
to the competition. Hence a new law has been enacted and published in the
gazette of India on 14 January, 2003
for bringing competition in the Indian market.
In
this paper is discussed what are the differences between the MRTP ACT and the
present existing law that is the
Competition Act 2002. As per the differences between these two Acts are concern the study discussed the different
aspects such as the area of coverage under MRTP ACT and what are the changes has been brought after the commencing
the Competition Act 2000. This article covers the aspects of
differences on the grounds of Size and the approaches such as in the previous MRTP Act the size of the company
was a factor to decide whether an agreement of
merger is anti-competitive or not.
NEED
FOR STUDY:
Every legal system of the whole over the
country follows their own principle.
But the common principle like the implementation of the rights of the common people are similar to all of the
countries. The law relating to the regulation of monopoly practices in the business must be controlled. For
this purpose, MRTP ACT was enacted by the Indian parliament to regulate the monopoly practices in the trade,
there were some limitations in the MRTP Act itself.
Because under the MRTP Act
big enterprises were consider to be a crime.
Along
with the legal development of the country to protect the interest of the
consumer the consumer protection Act
was passed by the Indian parliament. The matters which were covered under the MRTP act were taken by the
consumer Protection Act after the recommendation of various committee on the competition law the Indian parliament
enacted the competition Act 2002. This article will help you to improve your knowledge relate tO MRTP ACT, 1969 and Competition Act 2002.
1. INTRODUCTION:
The
competition is essential for the interest of the consumers. In the economic concept, the rights of the
consumers are well protected in the perfectly competitive market where there is large number of
buyer and seller. When there is a large number of buyer and seller, the seller cannot take unfair number of charges from
the consumer and also the products are as per the standers to survive in
the market.
To
regulate the competition the Indian parliament enacted the MRTP ACT in 1969 to
control the unfair practices. But the
MRTP act was not appropriate to regulate the competition in India. The size, process and moreover the MRTPO ACT was
in preventive and behavioral in nature.
With
the development of the legal frame work of the nation when the consumer
protection act has been passed by the Indian
parliament many jurisdictions under the MRTP ACT has been taken
by the consumer protection Act.
Then
it was necessary to have a change in the MRTP ACT to regulate the competition
of the country, the govt has
appointed various committees to recommendation the legal frame work regarding
the competition in India.
After the recommendation the Indian parliament passed the COMPETATION ACT OF 2002
To understand the important of the Competition act
it is necessary to find out what are the differences between the act and the competition
act.
In
this article we discussed the differences between the MRTP Act and what are the
changes has been taken please in the
competition act. For the purpose of better understanding of a law it is necessary to have a proper understanding
on the Historical progress of the Act. Specially the compares with the earlier similar Types of Laws where were in
time being Force Before the Enforcement of Such Act.
For
this purpose, the present article titled Differences between MRTP act and
Competition Act aimed to study and
critically analyze the differences which has been changes in the Competition Act which was not in the earlier MRTP act.
As per the differences between these two Acts are concern the study discuss on the basic grounds that under MRTP
Act, size of the Company was taken bad in the eye of law. But under the
competition Act, size is not a factor to determine theater any combination or the agreement is
anti-Competitive or not.
The
MRTP Act was mainly based on procedure oriented on the other hands Competition
Act is based on adverse impact.
The
earlier MRTP Act was based on behavioral Approach on the other hand Competition
Act is based on Punitive approach.
2.
MRTP ACT AND ITS APPLICABILITY:
The
preamble to the MRTP Act described it as “An Act to provide that the operation
of the economic system does not result in the concentration of economic power
to the common detriment for the control of monopolies, for the prohibition of
monopolistic and restrictive trade practices and matters connected therewith or
incidental thereto.” The MRTP Act has made distention between monopolistic and
restrictive trade practices. Accordingly, the monopolistic trade practices were
described as “dominant firm practices”, i.e., a firm or a oligopolistic group
of three firms, after attaining a dominant position has been “able to control
the market by regulating prices or output or eliminating competition.”
Restrictive
trade practices include concerted action undertaken by a group of two or more
firms so as to avoid competition from the market irrespective of their market
share. These types of practices are “deemed to be prejudicial to public
interests.” In order to make necessary review of the working of MRTP Act and to
make necessary recommendation for streamlining its activity, the Government
appointed a Sachar Committee in 1977.
On
the basis of the recommendations made by this committee, the Government made
necessary amendments in Act in 1980 and also in 1984. In 1991, a significant
amendment was made where chapter (III) on Monopolies was dropped.
Inter-Connected
and Dominant Undertakings of MRTP Act: The MRTP Act analyses a business house
in terms of inter-connected undertakings and dominant undertakings. Moreover,
the MRTP Act broadly covered two types of undertakings, i.e., national
companies or product monopolies. All the national monopolies were covered by
section 20
(a)
of the Act and they include “single large undertakings” or “groups of
inter-connected undertakings” which had assets to the extent of Rs 100 crore
(in the pre-1985 period, the limit was fixed at Rs 20 crore). Dominant
undertakings, also known as product monopolies, were covered under section 20.
(b)
and they include those undertakings which controlled to the minimum of
one-fourth of production or market of a product and had assets to the minimum
of Rs 3 crore (previously this limit was Rs 1 crore). Thus, the large
industrial houses having inter-connections with a number of undertakings
normally have countrywide concentration of economic power and industrial
activity and thereby have substantial control on country’s resources. But the
dominant undertakings are mostly dominant within a single industry.
Companies
under MRTP Act are nor
(a)
Substantial expansion of production capacity,
(b)
Diversification of existing activities,
(c)
Establishment of inter-connected undertakings,
(d)
Amalgamation or merger with any other undertakings; and
(e)
Takeover of the entire or part of other undertakings.
The
MRTP Commission normally considers all these sorts of proposals to justify its
public interest. Till the end of March 1990, 1,854 undertakings were registered
under the MRTP Act. Out of these, 1,787 undertakings were belonging to large
industrial houses and the remaining 67 undertakings were dominant undertakings.
Again,
the Industrial Policy, 1991 has now totally scrapped the assets limit for MRTP
companies.
The
definition of ‘inter-connected companies’ as adopted under the MRTP Act, was
having some loopholes, which have helped some industrial houses to escape from
the purview of the Act. It is also found difficult to establish
inter-connection in certain cases.
As,
for example, TELCO claimed that it was not having any interconnection with any
of the Tata company and Gwalior
Rayon claimed that it had no inter-connection with any of the Birla company.
Workings of the MRTP Act:
In order to study the effectiveness of
MRTP Act, it would be better to
assess the functioning of the MRTP commission. Whatever applications were
received by the Government under
Industrial Development and Regulation Act, only 10 per cent of it was referred to MRTP Commission. Out of these
applications referred, only 87 per cent of the
applications were a in respect of identifying the large business
houses with inter-connected undertakings, the
MRTP Act could not make much
headway. Out of these
inter-connected undertakings, only a few registered themselves with the MRTP Commission.
With
the adoption of a liberal definition of the ‘Core Sector’ by the Government,
even low- priority and highly
profitable industries like man-made fibers and synthetic detergents have been included in the core sector. In this
connection, A.N. Oza stated, “The objectives of curbing the growth of the large business
houses and checking
concentration of economic
power must necessarily take a lowly place in the
scheme of priorities.”
In
1995, a survey conducted by the Ministry of Industry and Civil Supplies
revealed that there were about 203
items in which there prevailed complete single firm monopoly. Moreover, in respect
of single firm monopolies, both Monopolies Commission and the powers of the Government under the MRTP Act were found to
be ineffective.
In
case of non-competing entrepreneurs, the question of intervening by the
Commission becomes irrelevant. In
respect of restrictive trade practices, the Commission works as a
quasi-judicial tribunal which cannot impose any penalties and it has no authority to issue interim injunctions.
2.1
THE MRTP ACT AND VARIOUS
DEFINITIONS.
As per MRTP Act, a monopolistic trade practice is a kind of trade practice which has the
effect of:
- a)
Maintaining unreasonable level of prices,
- b)
Preventing or reducing competition unreasonably,
- c)
Limiting technical
development detrimental to common interest, or
- d)
Allowing quality
deterioration, and
- e) As per 1984 amendment
unreasonably increasing the cost of production and prices of goods and services.
Again, as per MRTP Act, a restrictive trade practice (RTP) indicates a trade practice
which has the effect of preventing, distorting or
restricting competition in a manner obstructing the flow of capital into production stream and bringing
manipulation of prices or conditions of delivery or affecting the flow of supplies
in the market, leading to unjustified costs or restrictions on consumers.
The 1984 amendment to the MRTP Act
extended it to unfair trade practices, which include:
- a. The publication of an oral or
in writing statement by visible demonstration.
- b.
Publication of any advertisement matter for sale at bargain
price.
- c.
Allowing enticement by gift or contest.
- d.
Sale or supply
of sub-standard goods and
- e.
Hoarding or causing
destruction of goods and refusing to sell the product,
2.2.
PURVIEW OF THE MRTP ACT:
Under the purview of MRTP Act, a large number of different types of agreements were identified. Each
of such agreements was required to be duly registered with the Registrar of Restrictive Trade Practices along with the names
of the parties involved in the agreement.
All
these registered undertakings were subject to following types of control on
their different industrial activities:
- a.
while proposing to expand
the activities of the undertakings substantially by issuing fresh capital or by installing new machineries,
notice to the Central Government was required to be given for getting
approval (Section 21);
- b. while proposing to
establish a new undertaking, prior permission of the Central Government was required
to be obtained (Section 22); and
- c. while proposing to
acquire, merge or amalgamate with another undertaking, the sanction of the Central
Government must be taken before the execution of such proposal (Section 23).
The
entire responsibility to look after the occurrence of concentration of economic
power to the common detriment was on
the Government. If it so desires, it could refer the matter to the MRTP Commission for making an enquiry. But MRTP
Commission has been given an advisory role as
the ultimate orders, on any proposal have to be
passed by the Government of the day.
2.3.
THE MRTP ACT WAS FORMULATED WITH FOLLOWING OBJECTIVES:
- a. To have a careful watch
that the operation of the economic system does not create any concentration of economic power to
the detriment of the common people of the country.
- b.
To control
monopolies prevailing in the country; and
- c.
To have a check on monopolistic, restrictive and unfair
trade practices in the country.
Thus, in order to achieve these objectives, the MRTP
Act tries to control the activities of the big
business houses and dominant
undertakings of the country.
2.4. PROCESS OF LIBERALIZATION IN THE MRTP ACT:
The Government has been liberalizing the MRTP Act
during different periods. With the gradual liberalization
of the Act, the large business houses have been allowed to enter into a number
of industrial fields which were
previously closed for such houses, as a first step, the Government has reversed the policy by allowing the
large industrial houses to set up industries in 90 “zero industry” districts of the country
along with the benefits of transport subsidy
and cost compensatory measures.
The
Government introduced the first amendment to the MRTP Act in November 1981 and
the subsequent second amendment in
August 1982. The first amendment revised the definition of dominant
undertakings along with the definition of the term production of an undertaking so as to mean
goods produced by it for the domestic market.
The 1982 amendment classified the dominant undertakings covered under Industrial Development and Regulation Act into those having licensed
capacity and others not having licensed capacity.
Another
important change in the MRTP Act was related
to the power given to the Government so
as to grant outright exemption in respect of certain proposals for considerable
expansion and also new units
from the purview of MRTP Act.
These exemptions are mostly related to the proposals
of
- a.
Industry of high national
priority,
- b.
Raising production exclusively for export and
- c. Industry which is established or proposed to be
established in a free trade zone.
The MRTP (Amendment) Act, 1984 has also introduced
some changes in the MRTP Act on the basis
of the experience gathered by the Government and as per recommendations made by
the Sachar Committee. The amendment
made an attempt to clarify certain definitions for including certain
categories which were earlier left uncovered.
These changes
in the definition were mostly related to:
- a. Definition of goods as per sale of Goods Act, 1930.
- b. Change in the concept
of group to include those enterprises under the same management.
- c. Redefine inter-connected undertakings by reducing
the control of voting power from l/3rd
control over voting power to
25 per cent;
- d. Exemption of restrictions on capacity expansion
to the extent of 25 per cent of licensed
capacity.
- e.
Giving power
to the Central Government for severance of interconnection; and
- f. Including unfair trade practices
like misleading advertisements; bargain selling etc. within the purview of MRTP
Act.
Moreover, as per the recommendation of the Sachar
Committee, the monopolies in the public
sector have been included by the Government within
the purview of the MRTP Act.
Besides, a number of relaxations have been announced by the Government to liberalize the companies from the
purview of MRTP Act.
These relaxations include:
i. Opening up of a good number of industries to large houses as per the 1973 industrial policy
statement.
ii. To
introduce section 22-A in the MRTP Act for providing
fillip to production
in industries of high national priority and also for export.
iii. Allowing 5 per cent automatic growth
per annum in export-oriented industries,
iv. Permitting use of existing
capacities without MRTP clearance for other related
items produced by machine
tools industry, electrical equipment industry, steel forging and steel ingot industry;
v. Liberalizing industrial licensing policy in 1985 by the Government; permitting the unrestricted entry of large industrial houses and FERA Companies into another 21 high technology items of manufacture;
vi. Removing
the sick industrial companies from the purview of MRTP Act under the provision of the Sick Industrial
Companies (Special Provision) Bill,
1985;
vii. Extending
the scheme of de-licensing in March 1986 to MRTP/FERA Companies in respect of 20 industries of Appendix I (later on extended to 47 industries) for promoting the development of backward areas;
viii. Automatic
re- endorsement of capacity at the highest level of production achieved during 1988 and
1990;
ix. Freeing
dominant undertakings from industrial licensing policy restrictions applicable
under the MRTP Act; and
x. Raising the limit of assets for the purpose
of MRTP Act from Rs 20 crore to Rs 100 crore
and finally; the New Industrial Policy, 1991 scrapped the asset limit
for MRTP Companies altogether.
2.5. INDUSTRIAL POLICY,
1991 AND THE MRTP ACT:
As per the MRTP Act, any firm with assets over a
certain size (Rs 100 crore since 1985) was classified
as MRTP firms and such firm was allowed to start only selected industries on a case-by-case approval.
The
Industrial Policy, 1991 observed the following
regarding the MRTP Act, “The interference of the Government through MRTP Act in investment decisions of
large companies has become deleterious
in its effects on Indian industrial growth. Thus, the pre-entry scrutiny of
investment decision by so-called MRTP
companies will no longer be required. Instead, emphasis will be on controlling and regulating monopolistic;
restrictive and unfair trade practices rather than making it necessary for the monopoly houses to
obtain prior approval of the Centre for expansion, establishment of new undertakings, merger, amalgamation and
take-over and appointment of certain directors. The thrust of the policy
will be more on controlling unfair or restrictive business
practices.”
Moreover, the newly empowered MRTP Commission will
be authorized to initiate investigation Suo-moto
or any complaints received from any individual consumers or classes of
consumers regarding monopolistic, restrictive and unfair
trade practices.
Simultaneously,
provisions of the MRTP Act will be strengthened by the Government through amendments in order to enable the MRTP
Commission to take appropriate action in respect of monopolistic, restrictive
and unfair trade practices.
In
respect of the policy on MRTP, the Government is mostly guided by the
considerations for encouraging
investment by big business houses rather than to impose a curb or ceiling on
their assets. Under the present
circumstances, whether the Government will be in a position to control such monopolistic,
restrictive and unfair trade practices
seems to be doubtful.
2.6. RAGHAVAN COMMITTEE
REPORT:
Finance
Minister of the Government of India on 27-2-1999 declared in budget speech That MRTP Act becomes obsolete
in the light of international development relating
to Competition law in India.
A
High-level Committee in the matters was framed in 1999 October, the main
suggestions of the committee can be
summarized in the following words. – “in condition of equal opportunities to complete for business on the basis and quality
on their output and resource development follows market sources in meeting
consumers demand at the lowest possible
cost”.
A
draft was prepared, followed by the standing committee of the parliament, the
Parliament enacted the Competition
Act, 2000.
TO BE CONTINUED................ (PART - II)
.jpeg)
No comments:
Post a Comment