Explain the concepts of (a) monopolistic trade practices, (b) restrictive trade

practices and (c) unfair trade practices under the MRTP Act 1969. Has India
succeeded in preventing concentration of economic power through MRTP?
Illustrate with suitable examples.

Ans. II. Monopolistic Trade Practices (Ch. IV)

Secs. 31 and 32 of the Act deals with 'Monopolistic' trade practices. If one or
more monopolistic undertakings indulge in any trade practice which has or is likely to
have the effect of:
1. Maintaining prices at an unreasonable level by limiting, reducing or otherwise
controlling the production, supply or distribution of goods of any description or the
supply of any services;
2. Unreasonably preventing or lessening competition in the production, supply or
distribution of any goods or services;
3. Limiting technical development or capital investment to the common detriment;
4. Allowing the quality of goods produced, supplied or distributed or any services
rendered in India to deteriorate.

• Control
The Central Government may refer the matter to MRTP Commission for an
'inquiry', if it appears to the Central Government that one or more monopolistic
undertakings are indulging in any monopolistic trade practices or that monopolistic
trade practices prevail in respect of any goods or services. The Commission
investigates the monopolistic trade practice upon a reference made to it by the Central
Government or suo moto (upon its own knowledge or information) and submits its
report to the Central Government. The Central Government can pass an, appropriate
order" to remedy or prevent any mischieves which result or may result from such trade
practice" based upon the report of Commission. It can issue a order for :
(1) Regulating the production, supply, distribution or control of any goods or supply
of any service by it and fixing terms of sales including prices thereof;
(2) Prohibiting the undertaking from doing any act or practice or following any
commercial policy which prevents or reduces competition in the production, supply,
etc. of goods or services;
(3) Fixing standards for goods used by the undertaking as inputs or for goods
produced by it;
(4) Declaring unlawful an agreement or part thereof specified in the order;
(5) Requiring any party to any such agreement to change the agreement.
• Exemptions

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 Section 32 of the MRTP Act has given the list of circumstances under which a
monopolistic practice is not prejudicial to public interest. These are:
Such trade practice is expressly authorised by any enactment for the time being in
force;
The Central Government, being satisfied that any such trade practice is necessary;
To ensure the maintenance of supply of essential goods or services;
To give effect to the terms of any agreement to which the Central Government is a
party.
• Amendment to the Act
On September 27, 1991, the following amendments to the Act were made by
issuing the presidential orders:
The Director General (Investigation and Registration) has been empowered to
make an application to the Commission regarding Monopolistic Trade
Practices.
Provisions of deterrent penal punishment for contravention of orders passed by
the Commission.
III. Restrictive Trade Practices (Chs. V and VI)
A trade practice will be treated as restrictive trade practices which has or may
have the effect of preventing, distorting or restricting competition in any manner and
in particular:
(i) tends to obstruct the flow of capital or resources into the stream of production;
(ii) tends to bring about manipulation of prices or conditions of delivery or to
a f f e c t the flow o f supplies in the market relating to goods or services.
• Registerable Agreements — Types of Restrictive Trade Practices (Sec. 33)
The different categories of 'agreement' which are subject to registration under the
Act:
(1). any agreement which restricts, or is likely to restrict, by any method the
persons or classes or persons to whom goods are sold or from whom the goods
are bought;
(2). any agreement requiring a purchaser of goods, as a condition of such
purchase, to purchase some other goods;
(3) . any agreement restricting in any manner the purchaser in the course of his
trade from acquiring or otherwise dealing in any goods other than those of the
seller or any other person;
(4). any agreement to grant or allow concessions or benefits, including
allowances, discounts, rebates or credit in connection with, or by reason of
dealings;
(5) any agreement to purchase or sell goods or to tender for the sale or purchase of
goods only at prices or on terms or conditions agreed between the sellers or
purchasers;
(6) any agreement to sell goods on condition that the prices to be charged on re-
sale by the purchaser shall be the prices stipulated by the seller unless it is clearly
stated that prices lower than those prices may be charged.

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 (1) any agreement to limit, restrict or withhold the output or supply of any goods or
allocate any areas or market for the disposal of the goods;
(2) any agreement not to employ or restrict the employment of any method,
machinery or process in the manufacture of goods;
(3) any agreement for the exclusion from any trade association of any person
carrying on or intending to carry on, in good faith the trade in relation to which the
trade association is formed;
(4) any agreement to sell goods at such prices as would have the effect of
eliminating competition or a competitor;
(5) any agreement not herein before referred in this section which the Central
Government may specify for the time being one relating to restrictive trade practice
within the meaning of this sub-section pursuant to any recommendation made by
Commission in this behalf.
• Registration of Agreements
Section 35 lists out 12 types of restrictive trade agreements falling under Section 33
which should be registered with the Registrar of Restrictive Trade Agreements on
important functionary appointed by the Central Government under this Act.
Within 60 days in case of an agreement falling under Section 33, the following
particulars shall be furnished to the Registrar namely:
(1) names of the persons who are parties to the agreements;
(2) the whole of terms of the agreement.

If at any time after the agreement has been registered under Section 35, the
agreement is varied with regard to parties or its terms, particulars of variation shall be
furnished to the Registrar within I month after the date of variation. If the agreement or
variation therein is made by an instrument in writing, the particulars shall be furnished
by way of production of original or a true copy of that agreement. If the agreement or any
variation therein is not made by an instrument in writing, the particulars shall be furnished
by way of production of a memorandum in writing signed by the person.
• Keeping the Register
1. The Registrar shall keep a register in the prescribed form and shall enter therein
the prescribed particulars as regards agreements subject to registration for the
purpose of this Act.
2. The Registrar shall provide for the maintenance of a special section of the register
for the entry or filing in that section of such particulars as the Commission may
direct;
(a) particulars containing information, the publication of which would. in
the opinion of the Commission, be contrary to the public interest;
(b) particulars containing information as to any matter being information,
the publication of which, in the opinion of the commission, would
substantially damage the legitimate business interest of any person.
3 Any party to agreement required to be registered under Section 35 may apply to the
Registrar:
1. for the agreement or any part of the agreement to be excluded from the
provisions of the chapter relating to the registration on the ground that the

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 agreement or part thereof has no substantial economic significance or;
2. for inclusion of any provision of the agreement in the special section and
the Registrar shall dispose of the matter in conformity with any general or
special directions issued by the Commission in this behalf.
IV. Control of Certain Restrictive Practices (Sec. 31)
MRTP may inquire into any restrictive trade practice whether the agreement, if any,
relating thereto has been registered under Section 35 or not. If the commission after making
inquiry, is of the opinion that the practice is prejudicial to public interest, it may, by order,
direct that :
1. The practice shall be discontinued or shall not be repeated.
2. The agreement relating thereto shall be void in respect of such restrictive trade
practice or shall stand modified in respect thereof in such manner as may be
specified in the order.
Under Section 37(2), the Commission may permit the party to take necessary steps,
within specified time so that the trade practice is no longer prejudicial to public interest. If
the Commission is satisfied that necessary steps have been taken within prescribed time, it
may decide not to make any order for discontinuing the practice or any modification of the
agreement.
The Commission shall not make an order in respect of:
(a) any agreement between buyers relating to goods which are bought by buyers for
consumption and not for ultimate resale.
(b) a trade practice expressly authorised by any law.
If MRTPC, while conducting an inquiry into any restrictive trade practice, finds that a
monopolistic undertaking is indulging in restrictive trade practices, it may pass necessary
orders with regard to restrictive trade practices and submit the case along with its findings to
the Central Government for necessary action under Section 31.
• Prohibition of Maintaining Re-Sale Prices
According to Sec. 39, without prejudice to the provisions of the Act, any term or
condition of a contract for the sale of goods by a person to a wholesaler or retailer shall be
void in so far as it provides for minimum prices to be charged on the resale of goods in
India.
Similarly, no supplier shall notify to dealers; or otherwise publish on or in relation to
any goods a minimum price to be charged on resale of goods in India.
According to Sec. 40, no supplier shall withhold supplies of any goods from any
wholesaler or retailer seeking to obtain them for resale in India on the ground that such
retailer or wholesaler has sold or is likely to sell goods supplied by him, at a price below
resale p r i c e
Difference between MTPs and RTPs
Causes of Differences MTPs RTPs
1. Applicability Market power is sought to be misused. Competition is sought to be curbed.
Stress is on abusing market power. Stress is on preventing competition
from its free play.

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 2. Enquiry Commission can conduct enquiry on either Commission can conduct enquiry on any of
(i) reference from the Central Government, five bases (i) a complaint from 25 or more
or (ii) on its own knowledge or information. consumers or dealers, (ii) reference from
Central Government.(iii) reference from the
State Government, (iv) the application of the
Director General or, (v) on its own
knowledge or information.

3. Final Authority Commission submits report about the Commission itself can pass final order after
findings to the Central Government. The enquiry.
power of making final order rests with the
Central Government.
4. Role of Commission's role is advisory. It can Commission has the power of passing final
Commission only conduct enquiry. order which is subject to appeal only to
Supreme Court.

5. Consequences Consequences of indulging in an Consequences of indulging in an RTP

MTP are more serious. Apart from the order are not very serious. A cease and desist order
to prohibit the person concerned from is passed and the relevant
indulging in an MTF the Central clauses of the RTP agreement are de-
Government is empowered Glared void.
to pass orders to remedy or prevent
any mischief resulting from the practice.

6. Compliance With regard to the compliance of the No such requirement in the case of
final order, the Director General is required RTPs unless a specific obligation has
to report compliance of the cease order been imposed on the party concerned as part
within 90 days of the Government order. of the Commission final order.
The owner of the undertaking is also
required to report compliance of the cease-
order withing 90 days of the Government
order.
7. Registration Agreement relating to MTPs need not All agreements relating to specified
be registered. restrictive trade practices are required
to be furnished for registration to the
Director General.
(iv) Unfair Trade Practice
The MRTP Amendment Act, 1984 provides for the control of unfair trade
practices, Section 36A of the Act defines an unfair trade practice as follows:
"
An unfair trade practice means a trade practice which, for the purpose of
promoting the sale, use or supply of any goods or for the position of any services,
adopts one or more of the following practices and thereby causes loss or injury to
the consumers, of such goods or services whether by eliminating or restricting
competition or otherwise."
The different types of trade practices are listed below:
1. The practice of making any statement, whether orally or in writing or by visible
representation, which:
(i) Falsely represents that the goods are of a particular standard. quality or grade;
(ii) Falsely represents that the services are of a particular standard, quality or grade;
(iii) Falsely represents any re-built, second-hand, renovated, reconditioned or old

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goods as new goods;
(iv) Represents that the goods or services have sponsorship, approval, performance,
characteristics, accessories, uses or benefits of which such goods or services do not
have;
(v) Represents that the seller or the supplier has a sponsorship or approval or affiliation
which he does not have;
(vi) Makes a false or misleading representation concerning the need for, or the
usefulness of any goods or services;
(vii) Gives to the public any warranty or guarantee of the performance, efficacy or
length of life of a product or of any goods that is not based on adequate or proper test
thereof;
(viii) Makes to the public a representation in a form that purports to be:
Warranty or guarantee of a product or of any goods or services:
A promise to replace, maintain or repair an article or any part thereof or to repeat or
continue a service until it has achieved a specific result, if such purported warranty or
guarantee or promise is materially misleading.
(ix) Gives false or misleading facts disparaging the goods, services or trade of another
person.
(x) Materially misleads the public concerning the price at which a product or like
products or goods or services, have been, or are, ordinarily sold or provided.
(2) Permits the publication of any advertisement, whether in any newspaper or
otherwise, 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, or for a period that is,
and in quantities that are, reasonable, having regard to the nature of market in which
the business, and the nature of the advertisement.
(3) Permits the
(a) offering the gifts, prizes or other items with the intention of not providing them as
offered or creating the impression that something is being given or offered free of
charge when it is fully or partly covered by the amount charged in the transaction as a
whole;
(b) conduct of any contest, lottery, game, of change or skill, for the purpose of
promoting, directly or indirectly, the sale, use or supply of any product or any
business interest.
(4) Permits the sale or supply of goods intended to be used, or are of a kind
likely to be used, by consumers, knowing or having reason to believe that the goods do
not comply with the standards prescribed by the authority relating to performance,
composition, contents, design, etc.
(5) Permits the hoarding or destruction of goods, or refusal to sell the goods or
to make them available for sale, or to provide any services, if such hoarding or
destruction or refusal raises or tends to raise the cost of those or other similar goods
or services.
The following trade practices are called unfair trade practices:
1). Misleading advertisement and false representation;

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 2). Advertising of bargain price (or bait-advertising) and switch selling;
3). Offering of pseudo gifts or prizes and conducting of promotional contests,
lottery and games of chance or skill;
4). Supplying of unsafe or hazardous products; and
5). Hoarding or destroying of goods, or refusal to sell goods, resulting in a
price increase.
Inquiry of Unfair Trade Practices Commission
(1) Sec. 36 B: The Commission may inquire into any unfair trade practice:

(a) Upon receiving a complaint of facts which constitutes such practice for
any trade or consumer association having a membership of not less than
twenty five persons or from twenty five or more consumers; or
(b)Upon a reference made to it by the Central Government or a State
Government;
(c ) Upon an application made to it by the Director General; or
(d) Upon its own knowledge or information.
(2) Sec. 36 C: In respect of any unfair trade practice of which a complaint is
made under clause (a) of Section 36 B, the Commission shall, before issuing any
process requiring the attendance of the person complained against, cause a preliminary
investigation to be made by the Director General, in such manner as it may direct, for
the purpose of satisfying itseif that the complaint requires to be inquired into.
(3) Sec. 36 D:
(i) The Commission may inquire into any unfair trade practice which may
come before it for inquiry and, if, after such inquiry, it is of the opinion
that the practice is prejudicial to the public interest, or to the interest of
any consumer or consumers generally, it may by, order, direct that:
(a) the practice shall be discontinued or shall not be repeated; and
(b) any agreement relating to such unfair trade practice shall be void or
shall stand modified in respect thereof in such manner as may be
specified in the order.
(ii) The Commission may, instead of making any order under this section,
permit any party to carry on any trade practice, if it so applies and takes
such steps within the time specified by the Commission as may be
necessary to ensure that the trade practice is no longer prejudicial to the
public interest or to the interest of any consumer or consumers generally
and, in any such case, if the Commission, is satisfied that necessary steps
have been taken within the time so specified, it may decide not to make
an order under this section in respect of that practice.
(iii) No order shall be made under sub-section (i) in respect of any trade
practice which is expressly authorised by any law for the time being in
force.

(4) Sec. 36F: Without prejudice to the provisions of Section 12A, Section 12B and
Section 36D, the Commission and the Director -General may exercise, or perform , in
relation to any unfair trade practice, the same power or duty which it or he is empowered
or required by under this Act to exercise or perform, in relation to a restricted trade

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practice.
Control of Unfair Trade Practices
The provisions to control unfair trade practices have been included in the Act by
MRTP
(Amendment) Act, 1984.
The MRTP Commission may inquire into any unfair trade practice which is
referred to it for inquiry. If the Commission is of the opinion after making inquiry that
the practice is prejudicial to the public interest of any consumer or consumers in general
it may order that :
(a) The practice shall be discontinued or shall not be repeated;
(b) Any agreement relating to such unfair trade practice shall be void or shall
stand modified in respect thereof in such manner as may be specified in
the order.
The Commission may also permit to continue trade practices if that party applies
the recommendations of the Commission within the time frame so specified. If any
person or party continue to contravene the orders of the Commission, he or it may be
punishable with imprisonment for the maximum of 3 years or with a fine which may be
extended to Rs. 10,000 or both. The Commission also enjoys the powers to direct the
guilty person or undertaking to pay compensation to the person or party who is the
sufferer.
Recent Changes
The Industrial Policy Statement of July 24, 1991, announced very drastic changes in
the MRTP Act, viz., repeal of the provisions cf Act pertaining to concentration of
economic power, except the provisions empowering the government to defuse
concentration of economic power to the common detriment. In other words, the main
thrust of the MRTP Act hereafter will be to the achievement of prevention of
monopolistic, restrictive and unfair trade practices. Thus, the `M' has almost been
knocked out of the MRTP Act.
The provisions of the MRTP Act pertaining to the concentration of economic
power were much criticised because of their negative impact on growth and
competition.

The MRTP Act sought to prevent the concentration of economic power to the
common detriment by preventing those developments which might result in the
concentration of economic power such as substantial expansion of existing undertakings;
mergers and amalgamations; takeovers; and, interconnection of undertakings.
Accordingly, the MRTP companies (i.e., dominant undertakings with assets of Rs. one
crore or more and other undertakings having assets, including that of interconnected
undertakings, of Rs. 100 crores or more) had to obtain prior approval of the central
government for any of the developments mentioned above.
As the new industrial policy Statement confesses, with the growth complexity of
industrial structure and the need for achieving economies of scale for ensuring higher
productivity and competitive advantage in the international market, the interference of the
government through the MRTP Act in investment decisions of large companies became
deleterious in its effect on Indian industrial growth.

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 It has, therefore, been decided to repeal the provisions of the MRTP Act requiring
prior governmental approval for expansion of exiting under takings; establishment of new
undertakings; merger, amalgamation and take over; and appointment of certain directors.
The thrust of the MRTP Act in future will be on the control of restrictive and unfair
trade practices.
The Government, however, retains the power to defuse or break-up concentration
of economic power to the common detriment. If the central government is of the opinion
that the working of an undertaking is prejudicial to Inc public interest, or has, led or is
leading, or is likely to lead, to the adoption of any monopolistic or restrictive trade
practice, the government is empowered by the MRTP Act to direct :
i the division of any trade of the undertaking by the sale of any part of the
undertaking or assets thereof:
ii the division of any undertaking or interconnected undertakings into such
number of undertakings as the circumstances of the case may justify