In the pre-1991 period the declared policy of

the government was to curb and restrict the

growth of monopoly power in the country. for
this purpose, the government imposed
restrictions on the entry of large business
houses in a number of industries, set up a
large number of industries in the public sector,
and undertook various measures to encourage
small and medium industries.
The most important in this phase was passing of
the MRTP Act (Monopolies and Restrictive
Trade Practices Act) in 1969 and the setting
up of the MRTP Commission in 1970.
Since 1991, the focus has shifted from
controlling monopolies to promoting
competition.
The Monopolies and Restrictive Trade Practices
was adopted by the government in 1969 and
the MRTP Commission was set up in 1970.
The Act extended to the whole of India
excepting Jammu and Kashmir. It sought to
achieve the following principal objectives
1. Prevention of concentration of economic
power to the common detriment, control of
monopolies, and
2. Prohibition of monopolistic and restrictive
and unfair trade practices.
In 1977, the government appointed the Sachar
Committee to review the working of MRTP
and make recommendations. The Committee
made a number of recommendations and on
their basis, the government introduced
amendments in the Act in 1980 and 1984.
The MRTP Act covered two types of
undertakings viz., national monopolies and
product monopolies. National monopolies
were covered by section 20(a) of the Act and
were either ‘single large undertakings’ or
‘groups of inter-connected undertakings’
(i.e., large houses) which had assets of at least
Rs. 100 crore (prior to 1985, this limit was 20
crore).
Product monopolies covered under Section
20(b) and called ‘dominant undertakings’
were those which controlled at least one-
fourth of production or market of a product
and had assets of at least Rs. 3 crore (earlier
this limit was Rs. 1 crore)
The definition of ‘inter-connected undertakings’
was flawed and enabled many companies
which were under the shadow of the same
industrial house or the same corporate
decision-making authority to escape from the
clutches of the Act. Section 2(g) of the MRTP
Act had defined ‘inter-connected
undertakings’ as two or more undertakings
which are inter-connected with each other in
any of the following ways:
1. If one owns or controls the other.
2. Where the undertakings are owned by firms, if such
firms have one or more common partners.
3. Where the undertakings are owned by the bodies
corporate : (a) if one body corporate manages the
other body corporate, or( b) if one body corporate is
the subsidiary of the other body corporate, …….
(c) If the bodies corporate are under the same
management, (d) if one body corporate exercise
control over the other body corporate in any other
manner;
4. Where one undertaking is owned by a body
corporate and the other is owned by a firm, if one or
more partners of the firm: (a) hold, directly or
indirectly, not less than 50% of the shares whether as
directors or otherwise, over the body corporate;
5. If one is owned by a body corporate and the
other is owned by a firm having bodies
corporate as its partners, if such bodies
corporate are under the same management;
6. If the undertakings are owned or controlled
by the same group; and
7. If one is connected with the other, or through
any number of undertakings which are inter-
connected within the meaning of the one or
more of the foregoing sub-clauses.
By the end of March 1990, 1,854 undertakings were
registered under the MRTP Act. Of these 1,787
belonged to large industrial houses and the remaining
67 were dominant undertakings. The New Industrial
Policy, 1991 has now scrapped the assets limit for
MRTP companies. This means doing away with the
requirement of prior approval from Central
Government for establishing new undertakings,
expansions, mergers, amalgamations and takeovers
and appointment of directors.
A large number of agreements were specified in
the MRTP Act which fell under its purview.
Each one of these was required to be duly
registered with the Registrar of Restrictive
Trade Practices including the names of parties
to the agreement. Registered undertakings
were subject to the following control on their
industrial activities:
1. If it was proposed to expand substantially the
activities of the undertaking by issuing fresh
capital pr by installation of new machinery or
in any manner, notice to the Central
Government was required to be given and
approval taken (Section 21)
2.If it was proposed to establish a new
undertaking the prior permission of the
Central Government was required to be
obtained (Section 22); and
3. If it was proposed to acquire or merge or
amalgamate with another undertaking the
sanction of the Central Government was
required to be taken (Section 23)
Sections 31 and 32 of the MRTP Act relate to
monopolistic trade practices. ‘monopolistic
trade practice’ means a trade practice which
has, or is likely to have, the effect of-
1. Maintaining the price of goods or charges for
the services at an unreasonable level by
limiting , reducing or otherwise controlling,
production, supply or distribution of goods of
any description or supply of any services or in
any other manner;
2. Unreasonably preventing or lessening
competition in the production, supply or
distribution of any of goods produced,
supplied or distributed or any services
rendered in India,;
3. Limiting technical development or capital
investment to the common detriment or
allowing the quality or maintenance, of any
services.
4. Increasing unreasonably- (a) the cost of production
of any goods; or (b) charges for the provision, or
maintenance, of any services;
5. Increasing unreasonably- (a) the prices at which
goods are or may be, sold or resold, or the charges at
which the services are, or may be, provided; (b) the
profits which are, or maybe derived by the
production, supply or distribution of any goods or by
the provision of any services
6. Preventing or lessening competition in the
production, supply, or distribution of any
goods or in the provision or maintenance of
any services by the adoption of unfair
methods or unfair or deceptive practices.
According to the MRTP Act, a restrictive trade
practice means a trade practice which has, or
may have the effect of preventing, distorting
or restricting competition in any manner and
in particular:
1. Which tends to obstruct the flow of capital or
resources into the stream of production, or
2. Which tends to bring about manipulation of prices or
conditions of delivery or to affect the flow of
supplies in the market relating to goods or services in
such manner as to impose on the consumers
unjustified costs or restrictions.
A trade practice which has or may have the effect of
preventing, distorting or restricting competition in
any manner, is a restrictive trade practice.
‘Unfair trade practice’ means a trade practice
which, for the purpose of promoting the sale,
use or supply of any goods or for the
provision of any services, adopts one or more
of the following practices and thereby causes
loss or injury to the customers-
1. Making false representations and misleading
advertisements regarding the goods or
services.
2. Publications of any advertisement for the sale
or supply at a bargain price, of goods or
services that are not intended to be offered
for sale or supply at the bargain price.
3. Offering of gifts or prizes or other items with
the intention of not providing them as offered
or creating the impression that something is
being given free of charge whereas it is fully
or partly covered in the cost itself; and/or the
conduct of any contest, lottery, game of
chance or skill for the promoting of the
product.
4. Selling or supplying sub-standard, unsafe or
hazardous products.
5. hoarding, destroying or refusing to sell in
order to push up the price level.
With the economic reforms program in 1991,
MRTP Act lost its relevance in the new
liberalized and global competitive scenario.
There was a shift of focus from curbing
monopolies to promoting competition. The
government thus appointed Raghavan
Committee examine the whole issue.
Accordingly, the government decided to enact a
law on competition. Competition bill, 2001
was introduced in Parliament and passed in
December 2002. This Act is called
Competition Act, 2002.
It has been enacted to provide for the
establishment of a Commission to prevent
practices having adverse effect on
competition, to promote and sustain
competition in market, to protect the interest
of consumers at large and to ensure freedom
of trade carried on by other participants in
markets in India, and for matters connected
with or incidental thereto.
Competition Act, 2002, is designed for the
following purposes:
1. Prohibition of anti-competitive agreements;
2. Prohibition of abuse of dominant position;
and
3. Regulation of combinations.