The Monopolies & Restrictive Trade Practices Act (MRTP) 1969 came into force in June 1970. The Act has three main objectives; (i) to control and regulate concentration of economic power; (ii) to control monopolies and monopolistic trade practices unless any of them can be justified to be in the ” public interest; and (iii) to prohibit restrictive trade practices.
For entrepreneurs who are covered by the Act, it is not enough to have industrial licensing for the implementation of any programme of substantial expansion or the setting up of a new undertaking.
They must have the Central Government’s approval before they can go ahead with these proposals. Similarly, mergers, amalgamations or take-over in which such companies are involved also require prior approval.
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ADVERTISEMENTS:
Although substantial achievement has been made in the field of industrialisation in India during the last two decades under the Industries (Development and Regulation) Act, 1951, it has been felt that the established industrial houses were the main instruments of industrialisation.
It is essential for a country professing mixed economy that there is a continual broadening of the entrepreneurial base.
In our country, however, industrial licensing has unfortunately failed to achieve this objective on any significant scale.
ADVERTISEMENTS:
It is this imbalance that MRTP Act seeks to correct among other things. The central idea of this legislation seems to be not so much to maintain free competition in the Western sense, as to regulate the growth of these so-called monopoly houses in accordance with certain socially desirable priorities.
Four types of undertakings come under the purview of this Act viz., (i) An undertaking which has gross assets of Rs. 20 crores and above, (ii) Inter-connected undertakings which together have assets of Rs. 20 crores and above, (iii) A dominant undertaking which has assets of Rs. 1 crore and above.
A dominant undertaking is one which produces, supplies or controls one-third of any goods in the country, (iv) Inter-connected undertakings constituting a dominant undertaking and having aggregate assets of Rs. 1 crore or above.
Basically, the MRTP Act follows a middle course between accelerated economic growth and control of concentration of economic power, monopolies and restrictive trade practice is defined as a trade practice which results in preventing, distorting or restricting competition in any manner and which, in particular, tends to obstruct the flow of capital or resources into the stream of production or to bring about manipulation of prices or conditions of delivery and thus imposes unjustified costs or restrictions on the consumers.
ADVERTISEMENTS:
Twelve types of restrictive trade agreements mentioned in the Act are as follows: refusal to deal with particular dealers or classes of dealers; exclusive dealerships; price fixing in a concerted manner; forced buying by the purchasers of a product of another producer; discriminating between dealers in granting special benefits or concessions; resale price maintenance; exclusive distributorship; allocation of areas or markets to sole distributors; restrictions on the manufacture of process; boycott from trade association membership; price control arrangements. These features have been borrowed from similar provisions in the British law on restrictive trade practices.
The applicability of some of them in Indian conditions will be doubtful; in our conditions of shortage, the distribution and pricing of many commodities are often controlled and supervised by the government authorities and they are often party to such agreements. This Act will not apply to these agreements, although technically they are restrictive ones.