The Monopolies and Restrictive Trade Practices Act 1969, that has known several amendments, used to be the ruling Act on competition in India’s economy before it was repealed by the Competition Act 2002. Before looking into the provisions of the MRTP Act, we might need to understand India’s economic system before the enactment of such an Act.
In post-independence India, it is the Nehruvian Socialism Model of economy that was prevalent for some time. This model was particular in its nature as it allowed the co-existence of both public and private sectors making it neither a socialist system, like that of the Soviet Union, nor a market economy, like that of the United States. The involvement of the Government in the regulation of national economy aimed to ensure social justice along with economic growth[1]. However, this model failed and instead of achieving social justice, it was found to generate unequal distribution of income by the Mahalonobis Committee[2] in 1960. The private sector was found to function with a lot of concentration of power and to have monopolistic practices. As such, the MRTP Act sought to end those practices and to limit concentration of power as well as to stop other abusive practices such as restrictive trade practices.
In order to achieve control of concentration of power and monopolistic behaviour, the MRTP Act established a commission for this purpose. The commission was allocated the role of inquiring, with or without prior investigation, on any restrictive trade practise or monopolistic trade practice. After proof of such practices, the Commission was empowered to grant temporary injunctions and to award compensation to the concerned party be it the Central Government or some traders or even consumers. Monopolistic trade practices comprise the hindering of competition through unfair methods and deception, setting unreasonably high prices or causing to maintain high prices by limiting production or the supply chain, and the causing of goods or services to deteriorate by limiting investment or other development.
Monopolistic trade practices are presumed to be detrimental to public interest unless meeting certain exceptions. Restrictive practices are more specifically concerned with competition and anything that can prevent it or restrict it by obstructing the flow of capital into production or preventing consumers from buying goods due to unjustified increase of cost or disturbance of the supply chain and delivery process. The Act further prohibits unfair trade practices which consist of the use of a deceptive method or making a false representation as to the goods in order to promote sales.
The MRTP might have been a great step toward correcting a failing economic system that was once unaware of commercially poisonous practices such as monopolistic or unfair practices. However, this initial progressive move of curbing concentration of power was soon found to be insufficient amidst a developing international economy which grew on competition. In this regard, the Finance Minister of India stated in 1999 that it was time for the Government to adopt a positive approach to competition and foster it so as to adapt to modern developments.[3] The Raghavan Committee was formed to make recommendations for the improvement of the competition law behind the MRTP Act. Such recommendations have led to repealing of the MRTP Act by the Competition Act 2002.
The Report of the Working Group on Competition Policy 2007 categorised the aspects of a complete Competition Policy into one that seeks to enhance competition, through relaxation of industrial policies for example and liberalisation of trade, and into one that seeks to eliminate abusive control of the economy by certain dominant businesses which conduct can destroy and prevent any competition. The existence of a fair competitive market is meant to provide opportunity for all classes of society. This is to protect public interest and to ensure equity in the market. The achievement of such a goal is closely related to how democratic a government should function according to Amrtya Sen[4]. A government that ignores the economic interests of the public is not democratic and more likely to be a dictatorship. The government has to work alongside market in order to provide the regulative framework to protect the market from anti-competitive behaviour and unfair practices. In this way, the relationship between government and market is one of cooperation to ensure a healthy atmosphere of competition along economic development. The government is not to control competition in a way to prevent it but rather in a way to regulate it and promote it while protecting public welfare. This is necessary for the attraction of international investment.
As such, the MRTP provided an initial detailed legal framework for the control of concentration of power in the private sector and other anti-competitive behaviours that would impede the economic growth of the country by having the market monopolised at the hands of a few businesses to the detriment of the public interest. However, with the expansion of capitalistic liberal economies and the increasing need to integrate the international economic system for the sake of national economy’s progress, the Government of India found it necessary to change of approach towards competition law. Rather than simply trying to curb anti-competitive behaviour, the Government had to open itself to international investment. To allow so, it had to act as a promoter of competition or specifically, healthy competition which meant keeping the regulation of anti-competitive behaviour and unfair practices while positively promoting competition. The Competition Act 2002 was adopted for this purpose.
[1] Macroeconomics of Poverty Reduction : India Case study, http://www.igidr.ac.in/pdf/publication/PP-057.pdf [2] Mehta Pradeep S; Competition and Regulation in India – Leveraging Economic Growth Through Better Regulation [3]INTERNATIONAL JOURNAL OF LAW MANAGEMENT & HUMANITIES [ISSN 2581-5369] Volume 3 | Issue 3 2020 [4] Dreze, Jean & Sen, Amartya, (1995) “India- Economic Development and Social Opportunity”, Oxford University Press
This article is written by Zina Balkis Abdelkarim, of University of London Worldwide.