Monopolies and Restrictive Trade Practices Act 1970

The Monopolies and Restrictive Trade Practices Act (MRTP Act) was passed by Parliament of India on 18 December 1969 and got president’s assent on December 27, 1969,. But it came into force from June 1, 1970.

Current Status of MRTP Act

This act is not in force in India currently as it was repealed and was replaced by Competition Act 2002 with effect from September 1, 2009. The MRTP commission was replaced by Competition Commission of India.

Aims & Objectives of MRTP Act

On the basis of recommendation of Dutt Committee, MRTP Act was enacted in 1969 to ensure that concentration of economic power in hands of few rich. The act was there to prohibit monopolistic and restrictive trade practices. It extended to all of India except Jammu & Kashmir.

The aims and objectives of this act were:

• To ensure that the operation of the economic system does not result in the concentration of economic power in hands of few rich.
• To provide for the control of monopolies, and
• To prohibit monopolistic and restrictive trade practices.

Non-applicability of MRTP Act

Please note that MRTP act is not applicable to :

• Government Company and undertaking owned by Government.
• Company established by a Central or State Act.
• Trade Unions
• Companies which have been taken over by the central Government.
• Companies owned by registered Cooperative Societies.
• Any financial institution.

Definition of Monopolistic Trade Practice

 The act defines the Monopolistic Trade Practice as “Such practice indicates misuse of one’s power to abuse the market in terms of production and sales of goods and services.

• Firms involved in monopolistic trade practice tries to eliminate competition from the market.
• Then they take advantage of their monopoly and charge unreasonably high prices.
• They also deteriorate the product quality, limit technical development, prevent competition and adopt unfair trade practices”

Definition of Unfair Trade Practice

The act defines Unfair Trade Practice as

• False representation and misleading advertisement of goods and services.
• Falsely representing second-hand goods as new.
• Misleading representation regarding usefulness, need, quality, standard, style etc of goods and services.
• False claims or representation regarding price of goods and services.
• Giving false facts regarding sponsorship, affiliation etc. of goods and services.
• Giving false guarantee or warranty on goods and services without adequate tests.

Definition of Restrictive Trade Practice

The act defines Restrictive Trade Practice as “The traders, in order to maximize their profits and to gain power in the market, often indulge in activities that tend to block the flow of capital into production. Such traders also bring in conditions of delivery to affect the flow of supplies leading to unjustified costs.”

What is MRTP Company?

The firms with assets of Rs. 25 Crore or more were put under the obligation of taking permission from the government of India and they were called MRTP companies. This upper limit of Rs. 25 Crore was known as MRTP limit. It was later relaxed to Rs. 50 crore in 1980, Rs. 100 Crore in 1985 and in 1991 this limit was removed. Now only companies having more than 25% market share were called Monopolies.

Monopolies and Restrictive Trade Practices Commission

Monopolies and Restrictive Trade Practices Commission (MRTPC) was set up under section 5 of the Monopolies and Restrictive Trade Practices Act, 1969. The MRTPC is an organ of Department of Company Affairs, Ministry of Company Affairs, Government of India.

• MRTPC was a quasi-judicial body.
• Major function of the MRTP Commission is to enquire into and take appropriate action in respect of unfair trade practices and restrictive trade practices.
  • In regard to monopolistic trade practices the Commission is empowered to inquire into such practices
  • Upon a reference made to it by the Central Government
  • Upon its own knowledge or information and submit its findings to Central Government for further action.