The Monopolistic and Restrictive Trade Practices Act, 1969
The Monopolistic and Restrictive Trade Practices Act, 196 9, was enacted To ensure that the operation of the economic system does not result in the concentration of economic power in hands of few, To provide for the control of monopolies, and To prohibit monopolistic and restrictive trade practices. The MRTP Act extends to the whole of India except Jammu and Kashmir. Unless the Central Government otherwise directs, this act shall not apply to: a. Any undert undertaking aking owned or control controlled led by the Governm Government ent Company Company,, b. Any undert undertaking aking owned or control controlled led by the Governm Government, ent, c. Any undertaki undertaking ng owned or contro controlled lled by a corpora corporation tion (not (not being a company company establ established ished by or under any Central, Provincial or State Act, d. Any trade trade union or other other associat association ion of workmen workmen or employe employees es formed formed for their their own reasonable protection as such workmen or employees, e. Any undert undertaki aking ng engaged engaged in an indust industry, ry, the managem management ent of which which has been taken over over by any person or body of persons under u nder powers by the Central Government, f. Any Any under underta taki king ng owned owned by a co-o co-ope pera rati tive ve soci societ ety y form formed ed and and regi regist ster ered ed unde underr any any Central, Provincial or state Act, g. Any Any finan financi cial al insti institu tuti tion. on. •
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RESTRICTIVE TRADE PRACTICE A restrictive trade practice is a trade practice, which Prevents, distorts or restricts competition in any manner; or Obstructs the flow of capital or resources into the stream of production; or Which tends to bring about manipulation of prices or conditions of delivery or effected the flow of supplies in the market of any goods or services, imposing on the consumers unjustified cost or restrictions. INQUIRY INTO RESTRICTIVE PRACTICES The Commission may inquire into any restrictive trade practice Upon receiv receiving ing a compla complaint int from from any trade trade associ associati ation, on, consume consumerr or a regist registere ered d • consumer association, or Upon a reference made to it by the Central or State Government or • Upon its own knowledge or information • RELIEF AVAILABLE The commission shall if after making an inquiry it is of the opinion that the practice is prejudicial to the pubic interest, or to the interest of any consumer it may direct that – The practice shall be discontinued or shall not be repeated; • The agreement relating thereto shall be void in respect of such restrictive trade practice or • shall stand modified. The Commission may permit the party to any restrictive trade practice to take steps so • that it is no longer prejudicial to the public interest However no order shall be made in respect of a. any any agre agreem emen entt betw betwee een n buy buyer erss rela relati ting ng to good goodss whic which h are are bough boughtt by the buy buyer erss for for consumption and not for ultimate resale; • • •
b. a trade practice practice which which is expressl expressly y authorise authorised d by any law law in force. force. WHAT IS UNFAIR TRADE PRACTICE? An unfair trade practice means a trade practice, which, for the purpose of promoting any sale, use or supply of any goods or services, adopts unfair method, or unfair or deceptive practice. Unfair practices may be categorised as under: 1. FALSE REPRESENTATION The practice of making any oral or written statement or representation which: Falsely suggests that the goods are of a particular standard quality , quantity, grade, composition, style or model; Falsely suggests that the services are of a particular standard, quantity or grade; Falsely suggests any re-built, second-hand renovated, reconditioned or old goods as new goods ; Repr Repres esen ents ts that that the the goo goods ds or serv servic ices es have have spon sponso sors rshi hip, p, appro approval val,, perfo perform rman ance ce,, • characteristics, accessories, uses or benefits which they do not have; Represents that the seller or the supplier has a sponsorship or approval or affiliation • which he does not have; Makes a false or misleading representation concerning the need for, or the usefulness of, • any goods or services; Gives any warranty or guarantee of the performance, efficacy or length of life of the goods, that is not based on an adequate or proper test; Makes to the public a representation in the form that purports to bea. a warran warranty ty or guar guarant antee ee of the the goods goods or serv service ices, s, b. a promise promise to replace, replace, maintain maintain or repair repair the the goods until until it has has achieved achieved a specified specified result, if such representation is materially materially misleading misleading or there is no reasonable prospect that such warranty, guarantee or promise will be fulfilled Materially misleads about the prices at which such goods or services are available in the market; or Gives false or misleading facts disparaging the goods, services or trade of another person. • 2. FALSE OFFER OF BARGAIN PRICEWhere an advertisement is published in a newspaper or otherwise, whereby goods or services are offered at a bargain price when in fact there is no intention that the same may be offered at that price, for a reasonable period or reasonable quantity, it shall amount to an unfair trade practice. The ‘bargain price ’, for this purpose meansa. the price price stated stated in the adverti advertisement sement in in such manner manner as suggests suggests that that it is lesser lesser than the the ordinary price, or b. the price price which any person person coming coming across across the advertis advertiseme ement nt would believ believee to be better better than the price at which such goods are ordinarily sold. FREE GIFTS OFFER AND PRIZE SCHEMES The unfair trade practices under this category are: Offering any gifts, prizes or other items along with the goods when the real intention is • different, or Creating impression that something is being offered free alongwith the goods, when in • fact the price is wholly or partly covered by the price of the article sold, or •
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Offering some prizes to the buyers by the conduct of any contest, lottery or game of chance or skill, with real intention to promote sales or business. 4.NON-COMPLIANCE OF PRESCRIBED STANDARDS Any sale or supply of goods, for use by consumers, knowing or having reason to believe that the goods do not comply with the standards prescribed by some competent authority, in relation to their performance, performance, compositio composition, n, contents, contents, design, constructi construction, on, finishing finishing or packing, packing, as are necessary to prevent or reduce the risk of injury to the person using such goods, shall amount to an unfair trade practice. 5.HOARDING, DESTRUCTION, ETC. Any practice that permits the hoarding or destruction of goods, or refusal to sell the goods or provide any services, with an intention to raise the cost of those or other similar goods or services, shall be an unfair trade practice. INQUIRY INTO UNFAIR TRADE PRACTICES The Commission may inquire into Any unfair trade practice Upon receiv receiving ing a compla complaint int from from any trade trade associ associati ation, on, consume consumerr or a regist registere ered d consumer association, or Upon reference made to it by the Central Government or State Government Upon an application to it by the Director General or Upon its own knowledge or information. RELIEF AVAILABLE After making an inquiry into the unfair trade practice if the Commission is of the opinion that the practice is prejudicial to the pubic interest, or to the interest of any consumer it may direct that – The practice shall be discontinued or shall not be repeated; The agreement relating thereto shall be void in respect of such unfair trade practice or shall stand modified. Any information, information, statement statement or advertiseme advertisement nt relating relating to such unfair trade practice shall be disclosed, issued or published as may be b e specified The Commission may permit the party to carry on any trade practice to take steps to ensure that it is no longer prejudicial to the public interest or to the interest of the consumer. However no order shall be made in respect a trade practice which is expressly authorised by any law in force. The Commission is empowered to direct publication of corrective advertisement and disclosure of additional information while passing orders relating to unfair trade practices. •
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UNFAI UNFAIR: R: An Unfai Unfairr Meth Method od or an unfai unfairr decep decepti tive ve prac practi tice ce adopt adopted ed for for the the purpos purposee of promoting promoting the sale, use or supply supply of any goods or for the provision provision of any services, services, is an unfair trade practice under the Monopolies and Restrictive Trade Practices Act, 1969. Unfair Trade Practices under the Act include, practices such as making false statements in relation to the qual qualit ity, y, quan quanti tity ty (the (the stat statem emen entt coul could d eith either er be oral oral or in writ writin ing g or even even by visi visibl blee representation), sponsorship, uses or benefits of goods, passing off old goods as new, or giving of warranty/guarantee which is not based on proper test, making public representation that purports to be a guarantee or warranty or a promise to replace or replace articles if there is no reasonable guarantee that the warranty/repair or replacement will not be carried out.
Further practices such as misleading the public concerning the prices at which certain goods are to be sold or giving misleading facts or disparaging the goods or services of the other person, advertising the sale or services at a bargain price which is not intended to be sold at such bargain price, offering gifts or prices that are fully or partly covered by the amount charged, sale or supply of goods knowing fully well that they do not comply with the standards prescribed, hoarding or destruction of goods, etc. are also included in the definition of unfair trade practices. REMEDY:
Any trade associati association, on, consumer consumer or registered registered consumers' consumers' association association aggrieved aggrieved by such of the practices mentioned above can seek relief by filing a complaint before the Monopolies and Restrictive Trade Practices Commission, which on such complaint has powers to conduct an inquiry into such practices. Any consumer can approach the Commission irrespective of whether such consumer is a member of the consumers' association or not. The Commission can also conduct inquiry on the reference of the Central/State Government, on an application by the Director General or on its own knowledge or information. POWERS OF THE COMMISSION:
The Commission may, on satisfaction that the practice is an unfair trade practice, direct that such practice shall be discontinued, and in cases in which agreements in relation to such practices are made, the Commission may also direct that such agreement shall be void or specify the manner in which it shall be modified. Further the Commission also has the power to direct that any information relating to such unfair trade practices shall be disclosed, issued or published. Where such party takes such steps to ensure that the trade practice is no longer prejudicial to public interest, or the interest of any consumer or consumers generally, the Commission may permit such party to carry on such trade. MONOPOLISTIC TRADE PRACTICES A monopolistic trade practice is one, which has or is likely to have the effect of: i. maintaining the prices of goods or charges for the services at an unreasonable level by limiting, reducing or otherwise controlling the production, supply or distribution of goods or services; the prod product uctio ion, n, supp supply ly or unreason asonably ably pre prevent venting ing or lessenin lessening g competi competition tion in the ii. unre distribution of any goods or services whether or not by adopting unfair method or fair or deceptive practices; iii. limiting technical development or capital investment to the common detriment; iv. deteriorating the quality of any goods produced, supplied or distribute; and v. increasing unreasonably a. the cost cost of of produ producti ction on of any goo good; d; or or b. charges for the the provisi provision, on, or mainte maintenance,o nance,off any service services; s; or c. the pric prices es for for sale sale or resale resale of of goods; goods; or d. the profits profits derive derived d from from the productio production, n, supply supply or distribu distributio tion n of any goods goods or services. A monopolistic trade practice is deemed to be prejudicial to the public interest, unless it is expressly authorized under any law or the Central Government permits to carry on any such practice.
INQUIRY INTO MONOPOLISTIC TRADE PRACTICES The Commission may inquire into Any monopolistic trade practice, Upon a reference made to it by the Central Government or • Upon an application made to it by the Director General or • Upon it own knowledge or information • RELIEF AVAILABLE a. Wher Wheree the the inqui inquiry ry by the the Comm Commis issi sion on reve reveal alss that that the the trad tradee prac practi tice ce inqui inquire red d into into operates or is likely to operate against public interest, the Central Government may pass such orders as it thinks fit to remedy or present any mischief resulting from such trade practice. b. On an inquiry inquiry report report of of the Commis Commission, sion, the the Central Central Governme Government nt maymayi. Prohibit Prohibit the owner(s) owner(s) of the concerned concerned undertaking( undertaking(s) s) from from continuin continuing g to indulge indulge in a monopolistic trade practice; or ii. Prohibit Prohibit the owner owner of any class class of undertak undertakings ings or undertak undertakings ings generally generally,, from continuing to indulge in any monopolistic trade practice in relation to the goods or services. c. The Centr Central al Govern Governmen mentt may also also make make an orde order: r: i. Regulat Regulating ing the product production ion,, storage, storage, supply supply,, distribu distributio tion, n, or control control of any goods goods or services by an undertaking and fixing the terms of their sale (including prices) or supply; ii. ii. Prohi Prohibi bitt any any act act or prac practi tice ce or comme commerc rcial ial policy policy whic which h prev prevent entss or less lessen enss competition in the production, storage, supply or distribution of any goods or services; iii. Fixing standards standards for the the goods used or produced produced by an undertaking; undertaking; iv. Declaring Declaring unlawful unlawful the making or carrying carrying out of the specified specified agreement; agreement; v. Requiring Requiring any party party to the the specified specified agreement agreement to to determine determine the agreeme agreement nt within within the specified time, either wholly or to specified extent; vi. Regulating Regulating the profits profits which may be derived from the production, production, storage, storage, supply, supply, distribution or control of any goods or services; or vii. Regulating Regulating the quality of any goods or services services so that their standard standard does not deteriorate. POWERS OF THE COMMISSION The MRTP Commission has the following powers: 1. Power of Civil Court under the the Code of Civil Civil Procedure, Procedure, with with respect respect to: to: a. Summoni Summoning ng and enforcin enforcing g the attendanc attendancee of any witne witness ss and examini examining ng him on oath; b. Discovery Discovery and producti production on of any document document or other other material material object object producible producible as evidence; c. Recepti Reception on of eviden evidence ce on affida affidavit vits; s; d. Requisitio Requisition n of any public record from any any court court or office. office. e. Issuing Issuing any commissio commission n for examination examination of witness witness;; and f. Appeara Appearance nce of parti parties es and conse consequen quence ce of non-ap non-appear pearance ance.. 2. Proc Procee eedi ding ngss befor beforee the the comm commis issi sion on are are deem deemed ed as judi judici cial al proc procee eedi ding ngss with with in the the meaning of sections 193 and 228 of the Indian Penal Code.
3. To requi require re any perso person n to produ produce ce befor beforee it and to exami examine ne and keep any books books of accounts or other documents relating to the trade practice, in its custody. 4. To require require any person person to furnish furnish such informa information tion as respects respects the the trade practic practicee as may be required or such other information as may be in his possession in relation to the trade carried on by any other person. 5. To authorise authorise any of its its officers officers to to enter and search search any underta undertaking king or seize seize any books books or papers, relating to an undertaking, in relation to which the inquiry is being made, if the commission suspects tat such books or papers are being or may be destroyed, mutilated, altered, falsified or secreted. PRELIMINARY INVESTIGATION Befo Before re maki making ng an inqu inquir iry, y, the the Comm Commis issi sion on may may orde orderr the the Dire Direct ctor or Gener General al to make make a preliminary investigation into the complaint, so as to satisfy itself that the complaint is genuine and deserves to be inquired into. REMEDIES UNDER THE ACT The remedies available under this act are TEMPORARY INJUNCTION Where, during any inquiry, the commission is satisfied that any undertaking or any person is carrying on, or is about to carry on, any monopolistic, restrictive or unfair trade practice, which is a pre-judicial to the public interest or the interest of any trader or class of traders generally, or of any consumer or class of consumers, or consumers generally, the commission may grant a temporary injunction restraining such undertaking or person form carrying on such practice until the conclusion of inquiry or until further orders. COMPENSATION Wher Wheree any mono monopol polis isti tic, c, rest restri rict ctiv ivee or unfai unfairr trad tradee prac practi tice ce has has caus caused ed dama damage ge to any any Government, or trader or consumer, an application may be made to the Commission asking for compensation, and the Commission may award appropriate ap propriate compensation. Where any such loss or damage is caused to a number of persons having the same interest, compensatio compensation n can be claimed claimed with the permission permission of the commission, commission, by any of them on behalf of all of them. Competition Law in the reform era
Competition law in this country is about to get a completely new look. In its important areas there are going to be innovations too. The draft competition bill, which was approved by the Union Cabinet during the last week of June, is a major step forward for several reasons. At a philosophical level, the thinking behind the bill represents a fundamental change in the way the interaction between the Government and business interests is perceived. When enacted by Parliament, the new competition law will replace the Monopolies and Restrictive Trade Practices Act (MRTP) of 1969.During the more than three decades since the MRTP enactment, there has been a sea-change in the government business equation everywhere in the world. India cannot be an exception. The draft bill is based on a report on competition prepared by a committee headed by Mr. S. V. S. Raghavan. Naturally the report had to take cognisance both of global trends and circumstances special to India. Needless to point out, in a globalising economy issues such as competition cannot be confined to the geographical borders of a country.
The big change, however, lies in the official perception of business interests. In the 1960s and 1970s (and earlier) the belief in a command economy and the dominance of the state in economic matters dominated Indian economic thinking. Through a system of licensing and numerous other controls business groups were kept in fetters. It is questionable whether the MRTP regime checked the abuse flowing from monopoly positions. For the Indian consumer, the problem has been one of coping with lack of choice and often even with scarcity, which a system based on licensing helped foster. The MRTP legislation has been a necessary adjunct to the economic beliefs of those times. Promoting stakeholders The proposed competition law, in contrast, recognises the fact that business groups can and do work for the betterment of their own interests as well as those of their several stakeholders. In the new thinking the size of the firm and its market share are not by themselves a threat to the consumer. It is only when a firm that has acquired a dominant position and uses its dominance against consumers' interests should the regulators step in. It is not the potential to exploit but the actual commitment of a rapacious act that would bring in the enforcement machinery of the new competition set up. This concept of abuse of dominance rather than just acquiring a dominant position has become the central point of the new legislation and probably its most distinguishing feature. Elaborating the point further, under the MRTP Act all restrictive practices are presumed to be anti-c anti-comp ompeti etitiv tive. e. The draft draft compet competit ition ion bill bill adopts adopts a radica radically lly differ different ent approa approach: ch: not all agreem agreement entss betwee between n busine business ss groups groups (for (for expandi expanding, ng, consoli consolidat dating ing)) are prima prima facie facie antianticompetitive. Only when they impact adversely on competition do they become anti-competitive, enabling the new regulator, the Competition Commission, to step in. This feature of the bill which would determine anti-competition on the basis of specific acts and not by the potential to carry out such acts has uniformly been praised. Several other advantages have been claimed for the new dispensation. It will be more flexible than the MRTP Act. While the MRTP Act listed out 14 offences the new law recognises just four. Unlike the MRTC, the new Competition Commission can start suo motu proceedings. Competition advocacy is enshrined in the new law for which purpose a new competition fund will be put in place. More clarification needed More clarifications on the competition bill will emerge in the coming weeks. At this stage there are a few points of criticism against the bill. The Federation of Indian Chambers of Commerce and Indust Industry ry (FICCI (FICCI)) and other other indust industry ry organi organisat sation ionss say that that the norms norms for determ determini ining ng whether an enterprise enjoys a dominant position are totally subjective and that there is a need to spell out the extent of share and size to call a position dominant. Second, while the draft law allows for the prohibition of predatory pricing by a dominant enterprise, the method by which ``belo ``below w cost cost pricin pricing'' g'' will will be determ determine ined d by the regula regulator tor is unclea unclear. r. Three, Three, merger mergerss and amalgamations have been a sensitive area. The original bill provided for a mandatory pre-merger
notif notificat ication ion beyond beyond certai certain n thresh threshold old limit limits. s. (Global (Global assets assets exceedi exceeding ng Rs. 500 crores crores and turnover Rs. 1,500 crores). The Government has been seized of this matter and changes may emerge in the bill in the days to come. Only after the bill is passed and the new Competition Commission becomes functional can any judgement be made on the efficacy of the new start up. There is inevitably a measure of subjectivity in the new law that cannot be wished away. It is not the position position of dominance dominance per se as much as the abuse of dominance that is considered considered anti-competitive. Competition law on the anvil
PARLIAMENT is all set to consider the Draft Competition Regulation Bill shortly. From a regime of over-regulation we have moved to the opposite extreme of unregulated competition among national and multinational corporations. Time was when the Industries (Development and Regulation) Act, 1951 sought to interfere in the day-to-day working of companies to channel private investment through licensing. The Monopolies and Restrictive Trade Practices Act, 1969 and the Foreign Exchange Regulation Act 1973, created entry barriers to new firms. Clearances had to be obtained for expansion, and capacity licences were issued under a control system. Even agreements for the import of foreign technology required approval of the Government. Labour laws came in the way of closure of unviable units. All this has changed. The reforms initiated by Dr Manmohan Singh in 1991 led to a gradual withdrawal of the ``Licence Permit Quota Raj''. The Industrial Policy Statement of July 1991 declared: ``The attainment of technological dynamism and international competitiveness requires that enterprises must be enabled to swiftly respond to fast-changing external conditions that have become characterist characteristic ic of today's industrial industrial world. world. Government Government policy and procedures procedures must be geared to assisting entrepreneurs in their efforts. This can be done only if the role played by the Government were to be changed from that of only exercising control to one of providing help and guidance by making essential procedures fully transparent and by eliminating delays.'' Lice Licens nsin ing g has been been aboli abolish shed ed in all all but but seven seven indu indust stri ries es.. Th Thee publ public ic sect sector or has has lost lost its its importance. Export-import policy has been liberalised and tariffs reduced. It can be safely asserted that the private sector never had it so good from the point of view of absence of Government interference. It is in this context that the need for regulating unbridled competition has been felt. Global competitive environment Many countries have competition laws to deal with anti-competitive agreements among firms engaged in the same lines and firms with vertical integration. Mexican Competition Law seeks to protect Free Market Participation through elimination of monopolies and monopolistic practices. Anti-Trust laws have been popular in the US. The core objective of competition policy in most countries is to maintain a healthy degree of rivalry among firms in markets for goods and services. South Africa, the Netherlands and the UK have come out with laws radically altering competition regulations. There has been a divergence of views on competition policy in Europe and the US. American law focusses on the consumer
whereas in Europe, industry gets the focus. But in both regions, competition policy is based on distrust of concentration of economic power. The MRTP Act The MRTP Act is now sought to be buried. It owes its inspiration to Articles 38 and 39 of the Constitution which enjoins that the State should strive to promote public welfare by securing and protecting a social order in which socio-economic justice shall inform all institutions of national life, and ensure that the ownership and control of material resources are so distributed as to subserve the common good. The operation of the economic system should not result in the concentration of wealth and means of production to the common detriment. The Act was amended in 1991 and the Government realis realised ed that that pre-ent pre-entry ry restri restricti ctions ons under under the MRTP MRTP Act on the invest investmen mentt decisio decision n of the corporate sector outlived its utility, and became a hindrance to the speedy implementation of industrial projects. The Act was restru restructu ctured red with with focus focus on curbin curbing g monopo monopolis listi ticc restri restricti ctive ve and unfair unfair trade trade practices. Ten years after this amendment, the Government understood that the whole set up had become an anachronism, and a committee was set up to suggest ways and means to promote competition. On the basis of the S. V. S Raghavan Committee report, the Government came out with a new tax law styled the Trade Related Competition Bill. The new law The propose proposed d law will will enable enable the Governmen Governmentt set up a Compet Competiti ition on Commi Commissi ssion on with with a chairman of the rank of Supreme Court Judge. The Commission will have nine other members -all of the rank of High Court judges. The new law is different from the MRTP Act in that it focusses on the firm's structure, not size. The MRTP Act lists 14 offences. The New Bill will recognise only four such offences. The MRTP Act's role was only advisory. The proposed competition commission can initiate suo motu proceedings and levy penalties. The new law does not consider the firm's dominance per se inimical to competition. The MRTP Act frowned upon dominance and laid down an arithmetical test. The proposed law frowns only upon upo n abuse abuse of domina dominance nce.. It seeks seeks to regula regulate te agreem agreement entss that that contro controll product production ion,, supply supply,, markets, technical developments or investment in provision of services. All such agreements are considered anti-competitive and penalty can be levied. The recent experience with cement cartels is an example of price-rigging under agreements to share markets. Sources of production by way of geographical allocation of market will be considered anti-competitive. The Draft Law prohibits agreements arrived at between enterprises that directly result in bid riggin rigging g or collus collusive ive tender tendering ing.. The Bill Bill also also define definess bid riggin rigging g as agreem agreement entss betwee between n enterprises or persons engaged in identical or similar manufacturing, trading or provision of servic servicee that that has the effect effect of elimi eliminati nating ng or reduci reducing ng compet competiti ition on for bids, bids, or advers adversely ely affecting/manipulating bidding. Apart from these guidelines, other restrictive trade practices will fall under the rule of reason test before the Competition Commission of India (CCI). Registration of agreements was mandatory under the MRTP Act, but the new law has no such requirement. A combination is sought to be regulated beyond a threshold limit. The MRTP
Commission's Chairman was appointed by the Government. A Collegium consisting of the Chief Justice, the Finance and other Cabinet Ministers, the Cabinet Secretary and the RBI Governor, will select the CCI chairman. An important difference lies in the fact that the new law leaves unfair trade practices to consumer fora and not to the CCI. The MRTP Act had no proper definition of unfair trade practices. But the new law will take care of cartelisation that imposes unjustified cost on the consumers. Cases such as Sumitomo Corporation and others that quoted identical prices pursuant to a global tender floated by the Steel Authority of India, will be easier to deal with under the new law. The Supreme Court considered that in a price-fixing conspiracy, the conduct is illegal and no further enquiry was needed on intent or anti-competitive effect. It pointed out: ``The critical analysis in determining whether a particular activity constitutes a per se violation is whether the activity on its face seems to be such that it would always or almost always restrict competition, and decrease output instead of being designed to increase economic efficiency and make the market more rather than less competitive.'' (Hindustan Development Corporation, 1993, 3 SCC 499). These unhealthy trends will henceforth attract severe penalties. The new law dispenses with the requirement of pre-merger notifications. There will be a separate Bench of the CCI styled as the Merger Commission to deal with mergers. This part of the Law requires disposal of the case within 90 days. If there is no order, it will be presumed the merger has been approved. The new law also seeks to regulate predatory pricing though it is not clear how the Commission will determine pricing below the cost. There is bound to be some overlap between the functions of the High Court and the CCI when it comes to cases involving mergers, acquisitions and amalgamations. The Bill also expects the CCI to promote competition through advocacy. This is in line with the thin thinki king ng of the the OECD OECD.. Th Thee OECD OECD had poin pointe ted d out out that that in every every memb member er-co -coun untr try y wher wheree significant reform efforts have been undertaken, the competition agencies have been active participants in the reform process. Advocacy can include persuasion behind the scenes and publicity outside. This part of the Bill appears to suggest that the CCI should interact through the media to promote competition. What the future holds Modern economic legislation is becoming more complex. It has to take on giant MNCs thriving ENACTING A NEW LAW ON COMPETITION AND REPEAL OF MRTP ACT, 1969
The draft Competition Bill, 2001 and Repeal of the Monopolies and Restrictive Trade Practices (MRTP) Act, 1969 which received the approval of the Union Cabinet on June 26, 2001 covers prohibition of anti-competitive agreements, prohibition of abuse of dominance, regulation of combinations , such as acquisitions, mergers and amalgamation of certain size, establishment of Competition Commission of India (CCI) and functions and p owers of CCI. The objectives of the Bill are to provide for the establishment of a Commission to prevent practices having adverse effect on competition, c ompetition, to promote and sustain competition in markets in
India, to protect the interests of consumers, and to ensure freedom of economic action of the participants in market in India and for matters connected therewith or incidental thereto. The proposed Law will not apply ap ply to Government Departments and enterprises performing sovereign functions and policy making aspects of Governmental activities (decision making by Ministries/Departments/Offices Ministries/Departments /Offices of Central Government or State Governments)/ local bodies-like reservation for SSI, preference in procurement from SSI u nits/PSUs and such similar policies. The proposed Law will also provide for exemption of certain classes of enterprises and international agreements from the applicability of the Act by way of specific notifications. The Law would curb those practices, which would have an appreciable adverse effect on Competition. The proposed Law identifies three such ways in which such practices could occur as under: Anti-competitive Agreements: (Horizontal Agreements, Vertical Agreements) can be inquired into by CCI which could impose a penalty or an amount upto 10 per cent of its average turnover in the last three years for the offence. Abuse of Dominant Position (The criteria for deciding the dominant position are broader than one included in MRTP Act). Ac t). Enjoying a dominant position will not be a crime but its abuse will be a crime. Elimination/reduction of competitors in market achieved through acqu isitions, amalgamations or mergers (The proposed Law is not against every acquisition, merger or amalgamation, but it refers only to those acquisitions, mergers and amalgamation, which are of a certain prescribed size-size in terms of (a) assets or (b) turnover, Acquisition, merger or amalgamation would become ‘Combination’ when:
Nat Natur uree of Com Combina binattion ion
Grou Group p Stat Status us Cri Criter terion
(a) Acquisition by enterprises
N o G r ou p
(b)Acquisition by individuals ©Mergers/ amalgamation
Group
Value
Assets
In India World over
>Rs. 1,000 Cr. >US$500 million
Turn over
In India World over
>Rs. 3,000 Cr.
Assets
Turn urn ove over
In India World Over In Indi ndia Worl orld
>US$1500 million >Rs. 4,000 Cr. >US $ 2 Billion >Rs. 12,000 Cr.
over
>US$ 6 Billion
The proposed Law provides for an adjudicating relief machinery by way of establishing the Competition Commission of India (CCI) which would be a Quasi-Judicial Body. CCI will have a Chairperson and not less than two and an d not more than ten other Members, as may be specified by the Central Govenrment. The CCI will have the following powers: To issue "Cease and Desist" Orders To grant such interim relief as would be necessary in each case To award compensation To impose fines on the guilty To order division of dominant undertaking Power to order de-merger Power to order costs for frivolous complaints In addition to the adjudication function, the CCI will have the roles of advocacy, investigation, prosecution and merger control. The Statutory Regulatory Authorities can make reference to CCI for advice. The proposed Law provides for the post of Director Genral (and a host of his deputies in various places) to assist the Competition Commission in its inquiries. Unlike in MRTP Act, the Director General will not have powers to initiate investigations suo motu. In view of the policy shift from curbing monopolies to promoting competition, there is a need to repeal the Monopolies and Restrictive Trade Practices Act. Hence, the proposed Competition Law to be brought in, aims at doing away with the rigidly structured MRTP Act. The Competition Law proposed is flexible and behaviour behav iour – oriented. Other reasons are as follows: MRTP Act is based on the pre-reforms scenario whereas the new Law will be based on the post-reforms scenario. MRTP Act is based on the size as a factor whereas the new Law will be based on the structure as a factor. MRTP Act has 14 per se offences negating the principles of natural justice whe re the new Law has 4 per se offences, all the rest subjected to rule of reason. MRTP Act provides for Registration of agreements as compulsory whereas in the new Law there is no requirement of registration of agreement.
Under the new Law, dominance per se is not bad but only the abuse of dominance is considered bad whereas under the MRTP Law, dominance itself is bad. Combination Regulation mentioned in the Bill, ensures that Competition is not reduced . Combinations are not regulated by MRTP Act. MRTP Act has powers only to pass "Cease and Desist" orders and did not have any other powers to prevent or punish, whereas the Competition Law contains punitive provisions. MRTP Act does not vest MRTP Commission to inquire into cartels of foreign origin in a direct manner. The proposed Competition Law seeks to regulate them. The concept of ‘Group’ under the MRTP Act had wider import and was unworkable whereas the concept has been simplified in the proposed Law. The proposed Law provides for a Competition fund which shall be utilised for promotion of competition advocacy, creating awareness about competition c ompetition issues and training in accordance with the rules that may be prescribed. Pending cases pertaining to Unfair Trade Practices other than those relating to tie in sales, purchases or cases falling under clause (x) of sub-section (1) of Section 36A , the Monopolies and Restrictive Trade Practices Act, 1969 under the repealed Act shall stand transferred to the National Commission constituted under the Consumer Protection Act, 1986.
to drive out small firms from the market. The American Government has always been accused by Leftist economists of promoting the interests of six giant corporations engaged in such varied fields as agricultural seeds, biotechnology, pharmaceuticals. The European Commission recently blocked the merger of two American giants -- GE and Honeywell Corporation -- a decision that upset the Bush administration. The European Commission has shown its reluctance, in the words of Prof T. T. Rammohan, to expose its national champions to serious competition, and has stood in the way of measures that facilitate easier takeovers. Herein lies a cautious warning for the policy-makers.
