Chapter - I11

EVOLUTION OF COMPETITION LAW IN INDIA

 CHAPTER - 111
EVOLUTION OF COMPETITION LAW IN INDIA

3.1 INTRODUCTION:

This Chapter focuses on the evolution of competition law in India, tracing out
the catena of factors that led to the enactment of the MRTP Act, 1969' in the post
Constitutional era and how the economic reforms initiated aRcr 1900s have mndt the
India's extant competition law redundmt and the subsequent enactnlcnt of the
Competition Act, 2002 and the novel approaches in dealing with various trade practices
detrimental to competition and consumer interest recognized thereunder. It also
deliberates on the fundamental differences bctwccn tho two enactments and the
symbiotic relationship between law and economics in a changing society for meeting
changing needs and desires of the community.

Since attaining independence in 1947, India for the better part of half a century
thereafter, adopted and followcd thc policies comprising what are ppularly known as
"command and control" laws, rules, regulations and cxecutivc orders

During those days, Government intervention and ccmlrol pcwadcd almost all
areas of economic activity in the country. Gnvcmmcnt dctmnincd the plant sizes,
location of the plant, prices in a number of imp)rtant secton and allocution of scarce
ti nancial resources. Frce competition in the markct during that pcriod was undn severe
fetters primarily because of Govcmmcnt policies and strategies. It was in this setting
that the MRTP Act, 1969 was brought into force. It was in 1991 that widespread
economic reforms were undertaken and consqucntly the march from 'command and
control' economy to an economy based more on frcc markct principles commenced its
stride.

' ACI No.54 of 1969.

3 3 GENISES OF TEE MRTP Am, 1969
3.2.1 HlSTORlCAL BACKGROUND

During the British regime in India, the question of concentration of wealth and
economic power was never in the forefint and therefore, there was no legislative
measure to check and combat the same. The Government of lndia had been deeply
concerned with the control of concentration of wealth and removal of economic
disparities among people and which in fact is nlso in congruence with the goals set out
in the Constitution.

The Constitution of lndia in its quest for building up u just and humane society
has mandated the State to direct its policy towards securing that end. Articles 38 and 39
of the Constitution of India, which are a part of the Directive Principles of State POI~CJ
mandate, inter alia, that the State shall strive to promote the welfm of the p p l c by
securing and protecting us effectively, us it may, e social order in which .- social,
economic and political shall inform all the institutions of the national life, and the State
shall in particular, direct its policy towards securing the following:

b That the ownership and control of material resources of the community are so
distributed as hcst to sub scrve the common good; and

h That the operation of the economic system does not r~%ultin the conca~tmtion
of wealth and means of production to the common dctrimcnt.

The MRTP Act, 1969 was brought into force for realizing the explicit mandntc
set out in the Directive Principles envisaged in Part-IV of the Constitution of India,
namely, prevention of concentration of economic power.

The Directive Principles of Shtc Policy arc aimed at cslabli~hinga welfare Statc. 'l'herre principles,
though fundamental in thc formulation of pulicim by the State yrl they are explicitly made ax non-
enforceabk against thc Slate.
44
333 FACTORS THAT LED TO THE ENACTMENT OF THE MRTP ACT,
1969

India adopted the strategy of planned economic development since the early
1950's. The India's industry policy since Independence in 1947 commenced with the
The next watershed in Indushid policy was the
Indusbial policy Resolution of 1918.~
1956 ~esolution,' which emphasized gowth, social justice and self reliance.
Government intervention und control during those yews pervaded almost all anas of
economic activity in the country. Hence, there was no contestable and competitive
market. Govemment determined the plant sizes, location of thc plants, prices in a
number of sectors and allocation of scarce financial resources. The licensing policy of
the Govmment favored big business houses for they were in a better pasition to raise
large amount of capital and had managerial skills to run thc industry.

Further, the big business houses had the oddd advantage of mobilizing
financial resources fiom the bankers and tinuncial institutions. With no proptr system
of allocating license in place, licensing authorities were naturally incliritvl to prefer men
who had proved their ability by success in big busincss ventures in the past to men who
had still to establish their abili~y.All this led to pre-tmptiny of licenscs by a few
business houses, leading to concentration of wealth in a few hands. Thus, thc system of
controls in the shape of industrial licensing restricted thc frecxlom of entry into industry,
apart from concentration of econonlic power in a few individuuls or group of business
houses. Thus the emergence of monopoly industrics and industrial groups indulging in
anti-competitive practices that w m dcqrimental to general public came into fore with
their disastrous consequences on the economy.

' The tndwirial Policy Renolution defined he broad contourn of the Indualrial policy and ddineatcd tlw
role ofthe Slate in industrial dcvclopmen:, both as an mtrcpreneur and ars an aulhority.
' The Industrial Resolution 1956 made xignificant thrust on rapid industrialization, nubjrct to
Government inlerventionand replalion.
45
3.23 TRIGGER CAUSES FOR THE MRTP ACI; 1969

The Government was aware of its responsibility under the Directive Principles
of State ~ o l i cWhen
~ . ~ the draA for third five years plan was being prqnred in 1960,
the Government was interested in knowing the benefits of the implementation of the
first five year plans and how it inmased national income nnd its distribution among
population.

There are essentially three enquirieslstudies which acted as the londstnr for the
enactment of the MRTP Act, 1969.

The first study was by a Committee headed by Dr. R. K, tlazari, which studied
the industrial licensing procedure under the Industries (Development and Regulation)
Act 1951: The Committee concluded that the working of the licensing system had
resulted in disproportionate growth of some big busincss houses in India. 'This finding
was apparently not consistent with the Directive ~rinci~lcs.'

The second study was by a Committee set up in October 1960, under the
chairmanship of Professor Mahalanohis to study thc distribution and levcls of income
in the county.xThe Committee noted that big business houses wcrc emerging becauw
of "Planned economy" model practiced by the (iovcn~mcntand suggested the need to
collect comprehensive information pertaining to the various aspwt of concentration of
economic pow'a.

The third study was known as the Monopolies Inquiry (:ommission (MIC),
appointed by the Govcrnment in April, 1964 under the chairmanship of Mr. D ~ P
~ u ~ t a .The
' appointment of MIC was in fact promptcd by a report of the Mahalonohis

' Constitution of India; Article 39 (C) certain principles o r policy to be followcd by the Statc in the
formulation of its policies. hrticlc 39(C) reads a<follow "'fhat 111eoperation of the economic ryntcm
d m not result in the concentration of wealth to I ~ Kcommon detriment".
The Committee emphasizd thc need lo chanbe the licensing system MI ati to reduce the concentratton
of economic power.
' lbid
a The Committee is popularly knjwn as the Mahalanobin Committee on 1)iutribution af lncnmen and
Levels of Living.
The MIC was appointed under he Comminnion of InquiryAct,l952 to enquire into the cxtcnt and cffec~
of concentration of econnmic pow in private hands and the prevalence o f ~ l i ~ tand i crm~ric~lve
uade practices in important w c t m of economic acllvlty other Ihm agriculture with m i a l refiencc to
(1) the factors rqwmsble for wch concentration and the mcmopoliatic and rcalriclivc trade practices (ii)

46
Committee. The Committee was ajoined to enquire into the cxtent and effect, of
concentration of economic power in private hands and the prevalence of Monopolistic
and Restrictive Trade Practices in important sectors of economic activity, except in
agriculture. The Committee presented its report in Octoher, 1965, highlighting therein
that there was concentration of economic power in the form of pmduct wise and
industry wise concentration. It also noted that a few industrial houses were controlling a
large.nurnber of companies and that there existed in the country large scalc Restrictive
and Monopolistic Trade Practices.

As a corollary to its finding, the MIC drafted the Monopolir3 and Trade
Practices Bill to facilitate that the operation of economic systmn doesn't result in the
concentration of economic power to the common delriment. The Bill also provided for
the control of monopolies and prohibition of Monopolistic and Restrictive Trade
practices, which are prejudicial to public interest.

3.3 ENACTMENT OF THE MRTP ACT

The Bill drafied by thc MIC, us amended by thc Committee of the Parliament
became the MRTP Act, 1969 and was enforced frnm I" June, 1070. The Act drew its
inspiration from the mandatc enshrined in the Directive principles of State ~ o l i c ~in ~ '
the Constitution.

The MRTP Act drew heavily upon the laws cmbodid in the Shcmon Act and
the Clayton Act of the United States of Anrbrica, thc Monop)lics and Restrictive Trade
Practices (Inquiry and Control) Act, 1948, thc Rcsale Priccs Act, 1964 and the
Restricttve Trade Practices Act, 1964 of [Jni~edKingdom. The [IS Federal Trade

their social and economic consequences, and the cxtcnt to which t h y might work to the common
detriment and suggest such legalation and other meaturca that mighl bc cclnsidcred ncceamry in chc light
of such enquiry, including, in particular any new Icgirlatan to pridect cnxntial public inmta and the
procedure and agency fvr tk enforcement of such lcginla~ion.
"' The Directive Principles of State Policy arc guideliner to the C'cntral and State Governmmtn and are
cnqhrined in Pan 1V of the Cmtitution of India. The%povixicinr arc to be kcpi in mind by the policy
makers while formulating law and policin, 'lley arc nut mforccablc by any cwn; but they arc
considered hrndamcntal in the gonmancc of the county. making it a bounden duty of the Slate to apply
k govcmmx of the country for atablinhing a juqt & quitabk society
these principlen in t
47
Commission Act, 1914, as mended in 1938 and the Combines Investigation Act, 1910
of Canada also influenced the drahng of this Act.

3.3.1 THRUST AREAS OF THE ACT

The focal areas of the MRTP ~ c t "are direcled towards

I . The prevention of concentration of economic power to the common detriment;
2. The control of monopolies;
3. The prohibition of Monopolistic and Restrictive trade practices;
4. The prohibition of unfair trade practices,

The objective the MRTP Act is to curb Monopolistic, Restrictive and Unfair
Trade practices'2, which impede & advcrscly affect competition in the trude and
industry, apart from impairing the consumer interest. Thus, one of the main goals of the
Act is to encourage fair play and fair deal in the market besides promoting healthy
competition.

The principal objectives sought to be realized thrtrugh the MRTP Act arc:
prevention of concentration of cwnomic power to thc common dctrimalt.
control of monopolies,
prohibition of monopolistic trade practices,
prohibition of restrictive trade pradiccs.
prohibition of unfair trade practices.

Out of these five, the first two have bee11 de-tmphasizcd afltr ll~e1991
Amendments to the MRTP ~ c t " .Thus, the emphasis has not only bccn shificd to the
three last mentioned objectives but they havc bcxn re-cmphasizd The repilatory
provis~onsin the Act were applicable to almost every area of business - production,
" The preamble to the Act says that the Statute is enactcd lo provide that thc cwatirm ailhe economic
system does not result in the concentration of cconumic power tn the common detriment, for control of
monopolies, for prohibition of manopolistic and rc~trictivctrade practices ilnd for matlem incidental
thereto.
''The MRTP (Amendment) ACT,1984 had introduced the concept of 'unfair trade practice' into the Act
by in.ming S.36A, in pursuance of the rccommcndatiom of he High Powered Expcfl Committee, more
popularly dncribed as the Sachar Committrr.
" The provirions pertaining to mcrgcrx, amalgamal~onsand lake-overn were dclctd by the MR7P
(Amendment)Act, 1991
48
distribution, pricing, invement, purchasing, packaging, advertising, sales, promotion,
mergers amalgamationsand tahe- over of undertakings.

The Act seek to afford protection and support to consuming public by reducing,
if not eliminating from the market Monopolistic, Restrictive and Unfair Trade
practices.

' The MRTP Act is founded on the premise that unrestrained internction of
competitive forces, maximum material progress through national allocation of
economic resources, availability of qualitative goods and services at competitive prices
and ultimately a just and fair deal to the consumers.

3.3.2 AMBlT AND COVERAGE OF THE ACT"

The MRTP Act, as most competition laws in the world encompasses within its
ambit, essentially three types of prohibited trade practices, namdy, trstrictivc, unfair
and Monopolistic. The core of such trade practices are briefly touched upon hereunder.

3.3.2.1. RESTRICTIVE TRADE PRACTICES IRTPI':'

A Restrictive trade practice is gcnnally one, which hus the effect of preventing,
distorting or restricting competition.I6 In particular, a prncticc which tcwds to obstruct
the flow of capital or resources into thc stream of production, is a rcstrictivu tmdc
practice. Likewise, manipulation of prices, conditions of delivery or flow of supply in
the market which may have the effect imposing on the consulncr unjustifid costs or
restrictions is deemed as restrictive trade practice.
Certain common typa of Restriclive Trade Practices ~wumcrntcdin the Act arc."

1. Refusal to deal

" The pmvisions pertaining to concentralinn or ecanamic power wen: deleted by the MR'W
(Amendment) Act, 1991. A n n the 1991 Amendment, thc MKTP Act han bcm rentructured & Pre- entry
restrictions w ~ t hregard to prior approval ofthe (iovcmmcnl for amalgamation, merger or take over have
been omitted.
' I The provisions pertaining mnlrictivc ltade pacticcx are &all under Sa. 2(U), 33, 37, 38. 39 and 40 of
the MRTP Act.
''lbid ncc. 2(0)
" Id Sec 32
49
 2. T i e up sales
3. Full line forcing

4. Exclusive dealings

5. Concerted practice

6. Price discrimination

7. Re-sale price maintenance

8. Area restriction

9. Discriminatory pricing

Section 37 to 40 of Chapter IV of the MRTP Acl, 1969 provided for the control
of certain 'Restrictive 'Trade Practices'. The starting point in the contml of n-;;hiclive
trade practices begins with registration." The MRTP Commission could act
independently and pass final orders itself relating to any ~stric6vetrade pmaice.19 All
restrictive trade practices under the Ad are deemed legally to he prejudicial to public
interest. Onus of proof is therefore, on the entity, body or undertaking charged with the
indulgence of the Restrictive Triidc practice to plead "gateways" ~qumcratcdin the Act.
Hence, the Commission presumes a 'restrictive trade pmctice' is prejudicial lo public
interest unless and until such trade practice falls within the ambit of any onc or more of
the gateways enumerated in the MRTP Act, 1969~'.If the ~~n~rnission
is satisfied that a

''Id, Seclion 33
'"d. Section 37
jfl c or any procccdingr hefore the
id] Section 38: Presumption a, to publlc l n t t m l . (1) For ~ h purfn~wc
Cornmivvion under mtion 37, a restrictive trade prac~iccshall k deemed to he .~rcjudiclnl
. lo lhc public
i n t m t unless thc Commission is sativfied of any one or more of'thc rollowing cmumxlancm, that in to
say-
(a) that the restriction is reasonably neccwry, having regard lo thc chsrnctn of the ycxxla to which it
applies, lo protect again81 injury (whdhcr to personr or to prcmLws) in connrclirm with the
conwnp~ion,installation or URC of those p d n ;
(b) that h e removal of the mlriction would deny to the puhlic a purchavcn, conwmctm or u r n of any
goods, other specific and substantial knefitx or advantngn cnjoycd or likely to he cnjoyed by them
as such. whelhcr by virtue of the mitriclion itacll'or of any arrangctncnla or cwraticmn resulting
therefrom:
(c) that the rcvtnctlon 1.s reasonably nccamy to ccwntwact mraaurcs taken by any one pcrrwn not pariy
to the agreement u ~ l ha vlcw lo pnventmng or realnclrng compctlllon In or ~nrrlallon lo thr l d e or
business in which the p e m s party Lh.10 arc enpapd.
(d) '%I thc restriction is reanonably ncccnsnry to m b l c the penurns patty to ~ h agreement
c lo negotiate
fair terms for the supply goo& to, or the acquir~llonof goodn from any one pmnn pany therclo wh6
conuola a preponderant pan of k tradc or binran or acquiring or supplying awh gcmAr, or far lhe
supply of goods to any pcnron no1 pany to h e agreement and MI carrying on such a l d e or
h u a i n ~who. cithcr alone or in combination with any other wch pcrwans, controlc a prqmmtcrant
part of hc market. for such g&,
50
restrictive trade practice falls in any one or more of gateways and it is M e r satisfied
that the restriction is not umtwnable having regard to the balance between those
circumstances and any detriment to the public interest or consumers likely to result
from the operation of the restriction, then the Commissian may anive at the conclusion
that the restrictive trade practice is not detrimental to public interest and discharge the
inquiry against the charged party.

3.3.2.2 MONOPOLISTIC TRADE PRACTICES

The MRTP Commission could either suo mot0 or on the application of the
Director General of Investigation and Registration or an a reference fmm thc Central
Government, make an inquiry into whether n monopolistic trade pnctice was being
practiced by any undertaking, or if such a practice wos prevalent in rcspcct of any
goods or services. If thc Commission found, oftcr inquiry, that the monoln~lislictrade
practice was likely to operate against the public interest, it could rcpcxt that finding to
the Central Government. The Central Government moy pas such orders as it thinks fit

(e) 'fhat, having regard to the conditions actually obtaining or reaainably li~rcstenst thc timc of thc
application, the renloval of the restriction would bc likely to have a serious and pcrxixtcnt dvemc
effect on the scneral level of unemployment in an ma, or in attar taken toycthcr, in which a
substantial proportionof the trade, or induruy to which thc agrecmcnt rclutclr is dituatcd:
(I) That, having regard to the conditiom actually obtaining or rcwnably rorcrccn nt thc timc of the
application, the rsmoval of the rcstriction would bc likcly to cause a reduction in tht vdunrc or
earnings of the export busincsr which is subrlantial either in relatiim to thc wblc cltprt buninax of
lndia or in relation to the whole business (includingcxpofl husinenr) o f t k said tradc or induntry;
(6) That the restriction is reasonably required for purpose in connation with tle rnaintenancc ni' any
other restriction accepted by UK parties, whether under the same agrecmcnt or unda any other
agreement between them, being a restriction wh~chin f w d by thc C'mnni~wionnot to hc contrary
to the public intenst upon grounds other than thaw npecified in thin paragraph, or han been NO found
in previous proceedings before the Commission:
(h) That the rcstrictiondocs not directly restrict or discourage compet~ticmto any matenal degree in any
rclevant wade or industry and i5 not likely to do w; (i) that such tt#sict~onhas been enpnnnly
authorized and appmvcd by the Central Government:
(i) That such nsviction is n a w r y to meet the rcquiremcntr o f tht dcl'encc of lndia or any pan
thereof, or for the ~fcurityof lk State; or
(j) That the restriction in neccsksry to ensure t k maiqtenuncc of apply of g d n and nrrvicctienmtial
to the community and is funher satisfied (in any such ca..) that thc restriction in not unrcancmable
having regard to the halance bctwecn those circumclancea and any detrinicnt to t k public or to
persons not partics to the agreement (being purchawm, conrumnu or u r n of gmxlr produced a
sold by such partin, or pmunn cngagcd or weking to become engaged in the tradc or buninern of
~ l l i n gsuch g o d or of producing or elling similar goods) multing or likely to result from the
operation of the reytrictmn.
(2) In this section 'purchoacrs". "comumm2' and "urnt' includs p m purchasing, cmuming or
using for the purpose or in the c m of trade or busincnw m f r public pupom: and rcfrmu?~ in
Ihts section to my one pnnon include nfercnccm to any two or w e pmow k i n g intcr-mncdcd
undertaking or indivduals canying on businnn in pwnnahip with each other.
51
to remedy or prevent any mischief which resulted or could result fmm the monopolistic
trade

Monopolistic Trade Practice was to be deemed to be prejudicial to public

interest, except where it is proved as not prejudicial to the public interest by the party
charged with such allegation. Thus,the Act recognized a per st ruic in the case of
monopolistic trade practices.u The exceptions were (a) the trade practice was expressly
authorized by any enactment for the time being in force; wd (b) the Central
Government, on being satisfied that the trade practice is very expedient by a written
order, the owner of any undertaking to carry on the trade practice. Bcfi)rc issuing
permission, the Centml Govtment was to be satisfied that the tradc pnctice was
necessary (a) to meet the requirement of defense of India, or wly part of India or far the
sccurity of the State (b) to ensure the maintenance of supply of gocwis and services
essential to the community; (c) to give effect to the terms of any ageemall lo which
the Central Government was a party.23

3.3.2.3 UNFAIR TRADE PRACTICE ''

The 1984 Amendment to thc MRI'P A d had inscrlcd the provisions germane to
the Unfair Trade ~ r a c t i c ewithin
~ ~ its ambit.

Consumers need to be protcctcd against fnlsc, untruthful and misleading

advertisements very often indulgcd in by traders and manufacturcw for promoting sale
and supply of goods and services. Such advcrlimcnts not only affcct the intcrats of
consumers apart fmm influencing their buying choiccs and prcfcrenccs. Therefox,
consumers should be enabled to exercise thcir informed choiws in the matter of
purchasing goods and hiring services. The legnl framework prior lo 1984 unda the

I' Monopolistic and Restrictive Trdc pracliccr Act, 1969 ; chapter IV, a t i o n 31, nec Aditay Mdto and
Robetr, India and WI'O, Isted 2005. P 197
"lbid. section 32.
" lbid sec 3l(a) & (b)
" 1984 Amendmenw to thc MKlP Act introduced provi~ianapcnaining to IJnl'air Trade I'racticen by
inserting wtion 36A
I' 'lhe High Powered Committee under ~ h cchairmanlhip of Mr. Jwuicc Rajindar Sechar opined that
advertiamml~and sales promotion have become well cn~abl~xhcd mmlea of modm bwiinecn ~cchniqucn.
That advisement$ and reprmtation~lo ccmnumcr nhauld not become dcc~ptivc.tlcnce. !he Commiltcc
recommended that a separated chapter should bc addd to thc MMRTP Act defining various unfair trade
practicen.
52
MRTP Act, 1969 was Found to be deficient in ad*g effectively the Falsity,
inaccuracy and unfairness in advertisements. That was the reason why the Justice
Rajindar Sachar Committoe has addressed this vitnl issue and made appropriate
recommendations.

Essentially, Unfair Tmde Practices fall under the following five categories under the
Indian Law.

1. Misleading advertisements and false representations.

2. Bargain sales, bait and switch selling.

3. Offering of gifts or prizes with the intention of not giving than mid conducting
promotional contests.

4. Product safety standards.

5. Hoarding or destruction of goods.

Making false or misleading represenlation of facts or disparaging thc gods,

services or trade of another person also amounts to mi unfnir tradc practice. The
intention behind indulging in unfair trade practices by a business entity or individual is
'usually to promote sale of its goods or services by holding out untruthful, misleading,
deceptive and inaccurate rcpr~.jcnlationsos lo qualily, pn~perlicu,usa, affiliution, price
etc of goods or services by luring the consumcrs to buy goods or hire services. Thus,
the provisions pertaining to unfair Trade practices are aimd at safeguarding the
interests of consumers' against false, untruthful and misleading advcrtisc~ncnts.

The MR'TP Commission was wnferrcd with widc powers to inquire into such
practices & pass necessary remedial ~ r d r n . ~ ' '

". Ss.36-D and 36E dealt with various powers of the MRTPC apina unfair rradc praclicex.
53
3.4 AN ANALYSIS OF DISPOSAL OF COMPLAINTS AGAINST THE
UNFAIR AND RESTRICTWE TRADE PRACTICES UNDER THE
MRTP ACT, 1969.
Table: 3.1
An Overview of Restrictive Trade Practice Cases during 1999-2007

YEAR
NUMBER OF / CASES CASES CASES
BACKLOG FILED DISPOSED PENDING
CASES

Source: Information procured by the researcher under the RTI Act, 2005.
 Graph: 3.1

Graphic111depiction of Backlog and Casts Illcd in regard to RTPs d u t i n ~199P

2007
 Graph: 3.2

Graphical Representation of Cases Disposed and Prnding agai~irtRTPs during

1999-2007
 Table: 3.2

A Summary of Unfair Trade Practice Cases during 1999-2007

Source: Information procured hy the rcscarcher under the HTI Act, 2005
 Graph: 3.3

Graphical depiction of Backlog nnd Case$ Filed agninst

Unfair 'Trrrdc Practices during 1999-2007

 Graph: 3.4

Cases Dispnscd and Pending agalnst

Unfair Trade Pnctice during 1999-2007

Thus, tlic data per~ail~ing

lo the tlisposal of c u ~ ~ i p l i ~ ~111 ~ s ol' ~ l i c
n arsalxct
rcsptrictive and unfiiir trade practices by thc C'oo~missionev~dcntlydcmoostrrtcs that
there \\as an appreciable number of backlog cascs, rcsultiny in tlie timc takcn for
diposal of complainants by Ihc MRTPC gcning delayed inordinrtcly affscting the
quality of justice delivcly mccllanism. Thc data also indicatus hrdi~icssill I l c tlisposal
of complain~sand which is against [he cardinal prilrciplcs of cfl'ective ir11dcxpcditiuus
administration of justice, viz., that tllc dslaycd justicc is dcnicd justicc. Further,
Business demands promptness and punctuality in the Justice dclivcry mechanism to
fulfill its expectations. Unfortunrtly, the data cvidcntly shows that this couldn't bc
facilitated by the MRTPC. The Rescarcher is of the considered opinion that the MRTP
Act has gone into disrepute owing to pendency o f mounting complainls and inordillate
delay in disposal o f complaints by thc MRTPC and in fact thcsc dclic~cncicshave also
been taken inlo considerationby the Raghavan C'ommiltce.
35 ECONOMIC REFORMS AND IMPACTON THE MRTP ACT, 1969

It was in 1991 that India took the initiative in favour of economic reforms
consisting essentially of liberalization and de-regulation. Slated otherwise, lndia
embarked on the LPG regime, an acronym for I,ibenliza~ion, Privatization and
~lobalization.~'

In the post 1991 L.PG policy paradigrim, a numhcr of changes were introducd in
policit.; relating to industrial licensing, foreign invc.;tnic~it, lechnology imports,
Government monopolies and ownership, price, purchase prdercuce for the public
sector, reservations tilr the small scale scclor, ti~iancialscctor ctc. 'The main objective
behind the economic rcfcirms has been to make thc ~ii,uketdrivcri by competitive
forces, so that there could be inccritives for rilising protluctivity, improving cflicicncy
and rtxfucing costs. Tlius, there has bcen increasing reliance on the markct as tlic nii~in
engine fix promoting growth and dcvclopmnlt of tlic cconorny.

The concept of size and monopoly not vicwcvl with prcjudicc ;my more,
resulting in Amendments to the MKTP ~ c t . I:urthcr,
'~ the licensing rcquiranalt hin
become contined to a vcry sllort list of I~ldustrics.'l'lic other important Scirturcs of \hc
post 1991 paradigm include dc-controlling, dc-regulation, tlc-licc.osing, dc-can;lliziny
of intlustry Xr tr;~tlc.'l'llc itnportnrt fc;~lurcsot'rclibr~nsin ccrtiliti
and tle-hurcaucr;~ti~ing
scctors arc given in a succinct fbrnl hcre in below:

I , Industrial policy liccnsi~ighas been abolistictl cxccpl in rcspcct of six industrics.

2. Public Sector. 'fhc monopoly of public scclor i~ldustricscxccp( thosc, wllcrc
security and stritcgic coriccnis'" still tlomin;~tchas hccn abolished. Major
industries like iron ancl steel, air (ransport, tclccornn~unicrrrioncquipmcnt have
been opened for private scctor invcstmcnt.
3. Small scalc intlustrics. 'l'lic policy of rcscrvilllon ;~ndplrfcrcnlial trcatrncnt for
small scitle industrics continues but a lr~rgenumber of itcms 11i1vchccn rcmovcd
from the rcscrvcd category.

" Global17atlon I.; a protcu in whlcli thrrr 1% dn Incrca\lng Interaction atd ~nlrpretionof the lntlia'\
economy with Ihc World economy. r n n k l n ~thc nat~onalvcnnclnilr \ ~mrcavngly~nterdependcnt
" Supra note 14
'' Yecurrly and \tralcylc coracrn\ arc sard Itr he d(~~ntn.llern regard lo ~ndu\lrlc\pcrtatnlng l o anrlu,
amrnuntrton. alomlc energy. rare d n d prcclcluu nt~ncrdlu.rad tran*pc~rlclc
60
 4. Price conb-ol and quality controls for a number of co~nmdtieshave been
relaxed.
5. Import Licensing: Post 1991 refom~sthe list of restricted consumer goods has
been pruned, the number of canalized items has been reduced and the import of
some restrictive items has been liberalizd. Turiffs have becn reduced in a
phased manner.
6. Foreign Invatment: Foreign Direct Investment. Foreign Ttxhnology Agn~menl
and compulsory licensing hnvc been liberalizd. The cap on foreign holding has
also been enharlced in a number of sectors.
7. Financial S~xtor:This sector has bccn gradually dc-regulat~ul,Fntry of d o m ~ ~ t i c
and private foreign banks has been permitted. 1)omcstic tinimcial institutions
have becn pennittcd to cntcr conventional bunking activities. l'hc ol'ficc of tlrc
Controller of Capitrtl Issues was abolisl~crlin 1092.
8. State Monopolies iand I'rivatizi~tion: 1,imitcd I'riv;~tizationhas hccn ullow~dill
certain sectors. viz., civil Aviation, power ga~cri~lion,
'fclccom~~~ut~icillion,
oil
cxlraction and refining. Furlher, intlcpendcnt regulators have hccn establishcvl
for certain key sectors thr pmmoting a lcvcl playing field.'"

3.5.1 IMPAC'I ON 'IIIE h1H'IP ACI', 1969

Thus, it was only with the opening up of the cconoa~yin 1091 and ~ h chii11gc
c in
the ph~lc~sophy
of the Govern~naltthat hrougllt rihout a tlriln~aticand noticcable shif\ in
the economic sccn;~rioofthc country. It was klt that the M R fI1 Act, 1060 hat1 outlivc~l
its utility and it no longcr scrvcd the purposc i n the kst changing cnvironmcnf. I1 was
rcali~cdthat tl~crcwas no room for tinkcring wit11 the existing law ant1 there wiis a nccd
for a comprehensivc compct~tionlaw. 1 I Another pcrtinalt reason fi~rthe change of
mind behind the (iovcrnmcnt was that Intlia's obl~g;~tions
ansing out of 11smernbcrship
in W.T.0 compelled it to rcfonn its ohsolcscalt trade laws anti policies in compatihlc
s objectives of the International 'Iratlc Rcyi~nces~ahlibhctl
with the declared a i ~ r ~and
under the aegis of the WTO. Furthcr, aflcr the MKTPC' (Amctldmcnt) Act, 1901,

'I Independen1 rcgula~onhaw k e n pul In place for (,'iipilsl Markc~s.Ielcctrtn, I I c c ~ r ~ c l011

~ y ,Xr ( i i t s .
.
Pension and Provident Funds clc tn Ihc poal IO9lccc1norntc rchrnis cra and l h i ~prtxcss is nttll
continuing.
'' S. I). lran~. "C'ornpelllion l a w in India: A \lory of work in progrcsr." Ilflpiiwww.
compett~ioncommission.gov.in[acccswd on March 24.03 2O09. 1 : 30 PM)
61
provisions pertaining to concentration of economic power and pre-enhy restrictions
with regard to the prior approval of the Central ~ovemment'for establishing a new
undertaking, expanding and existing undertakings, malgmations mergers and
takeover of undertakings were all deleted h m dle Act. However, these periplieral
changes brought into the MRTP Act were evidently foulid to be deficient and
inadequate to mect the challenges and problems arising due to increasing integration of
the Indian economy with the World ccononiy and the gadual thinning out of national
economic boundaries. The W.T.0 trade ~ g i m ehas brought to the fore u certain new
challe~igcsand problerns in the h n n of increasi~lgcross border restrictive business
practices, mergrs, amalgamations having spill over effects on the Indian Ecc~nomyand
of which the MRTP Act was hardly equipped to tackle with. In addition, there was u
growing demand frorn the ititcmational com~nunitythat India should not only do uway
with the MR7'P Act hut also hevc spccitic law govcming competition in business.
I-lence, the need of tlic Ilour was to fhrniulate and put into force ;In ctTective and
workable competition rcgimc to deal with new cliallaigcs and problcnis arising in the
Indian economy owing to its increasing integration with the World cyonorny anti
obligations to be pcrfonnal under the WTO driven trade regime.

3.6 ME'TAMOKPI1OSES FROM T H E MH'TP 'TO 'TliE COMPE'I'II'ION

ACT, 2002

The MliTP Act wils fbund to he iridfkctivc ;~ndincflic:~ciousowing to a hr)st of

reasons, apart From its incongruity with thc chilngi~~g
economic scenario. Furtbcr, a
perusal of tllc MR'I'I' Act, 1050 will danonstratc th;~t~licrcis neither definition nor
even a mention of certain offcading tratlc practices which arc restrictive in charictcr.
Some examples of rhcsc arc: abusc of dominance, cartels, collusion anrl pricc fixing,
Bid liigging, Boycotts and Rcfusrll to deal and predatory pricing. Furthcr, tlic Act was
found to be lacking in tccth in dcaling with cross hortlcr restrictive tr;~dcpractices
having advcrsc effects on the Indian 1:cotiomy. ?bus, the MK'fI' Act has hccomc
obsolete in certain respects in thc light of international economic rlcvclopmcnts,
relating more particularly to competition laws, and thcrc is a n e d to shiR our fhcus
from curbing monop)lics to compctition. In this context, a question arose: is the
existing MRTP Act, 1969 could itself be suitably amended, instead of drafting and
bringing a new law into force.

Over the years, the Commission went into illttrpreting the provisions of the
MRTP Act in order to hmaden the coverage of Act. Otter1 lul nrgument has k e n
advanced that that the definition of restrictive trudc practicc'2 under the MRTP Act,
1969 may encompass all anti- competitive practiccs, as it delinatr.s a restriction trade
practice as,the one preventing. distorting, suppressing or restricting conipetitive process
could be tried under the general detinition of restrictive trade practice" hut the absence
of specification or identifiable anti-coapetitive prilcticcs alwllys provides a room lo
different intcrprctations by dilTcrcnt courts of law, with the result that the spirit of the
law may sometimes escape being captured and enfi~rccd,wllilc 3 generic itstinition nlay
~ Thcrcforc, it is
be necessary arid may limn the suhstantivc (iwndation of t l law.
imperative to identity specific anti-co~~ipclitivc
practiccs and dctine tl~clllso that the
scope for a value of operating on technical grounds for the oll'cncling practices to
escape indictment may not remain.

Sornc of the anti-compctitivc practices llkc cartsls, prettatc~ry pricing, bid

rigging ctc., were not spcc~ficnlly mcnt~oncd in tllc MIt'I'I' Act hut the MR'I'P
Commiss~on,over the years, had attanptcd to fit such ofTenccs undcr one or more of'its
sections by way of'inlcrprctation of tho language used tllcrcil~with 111uchdilliculty.
Another dimcnsiori to be kept in view is the tly~litnliccc~ntcxtof' Ir~tcrr~iltionul
trodc and
~riarkctas well as the clonicstic trade ;lntl tnrlrkct whcn the MR'I'I' Act was draAcit in
1069, the domin;lnt economic and Imdc milicu prcv;~laitat th;lt time constitutetl tlic
prcmlsc for its various provisions and pnnciplcs.

With the onset of I,ibcralisation, I'rivilisrltion and (ilob;llis:rtioti since 1991,

thcrc has bccn ii sea ckangc in the Indian cconomic sccnario. 'lhc changes in the
economic sccnario imp~~ativcly
tlnni~ndcda wppotli\,e Icgiil fiamc work to support
and sustain growth and tkvclopmcnt. 'I'llc W'1'0 tratlc regime, of which India is a part
has made it more vuln~ritbleto cmss border restrictive business practices ant1 ahusc of
rnarket power by powcrhl Iransnalionel corporation.;. 'fhc very success of economic

'" Morw)pol~e$and Krstnic~bcI radc pracllco Act. 1009. recllr~n210)

l1 Ihtd
63
reforms in fact hinges on the putting into force an effective competitive regime in India.
To address this issue, the Government of India set up a ~ornrnittee~~
to review the
provisions of MRTP Act. The Indian Finance Minister, in his budged speech in 1999
announced:

" f i e Monoplies and Restrictive Practices .4ct has bccornc obsolctc in certain
areas in he light oj'interna/iot~ald~~clopmcnts
relntir?gto cun~pcti/ion/arts. Wc need
10 shifi our~focus~fion~
nirbing n~ortopoliesto prontoring contpetitioir. C;o\liv-i~menfhcu
decided to appolnr a comnrirrcc lo eramine this rang(>of isstrc.~ar~dproposca ntoclern
competition law s~ri!ablcto conditiotu "

I'hc ~ommittee" was entrusted w~tlrthe unilcr ~ire~rti~n~xl

ternis of refkrcnce for
11srocommendation.

I. A suitable legislative framework, in the light of intcmntional ~ ~ o n o m i c

development, and the ncetl to fom~ulatci~ndput in brcc a co~tlpctitionlaw for
establishing an cfTcctivc cornpotition rcginrc there under, including law relating
to mergers and de-mergers. Such a liarncwork could crrtail ;I new law or
amendments to the existing MR'I'P Act.
2. Changcs pertaining to provisions ol' restrictive trade practices altcr reviewing
the existing provisions, clear d~nlarcationbawocn the MR'r1' Canmission nntl
consumer courts established urrdcr the ('onsu~na' I'rotcction Act, 1086
[COI'KA] and
3. Suitable adniinisrrativc measures ruluirctl to implcma~t tlic propos~xi
reconrmcndations, including rcstructurirrg the MR'lI' ('ommission, locution of
Bcncl~es outsiilc Dclhi fbr spcnly disposal of ci~scs pending hclbrc the
Commission.

'The Raghavan Con~rnittcc'~

submittal it5 rlctailcd report on 22d May 20()0.On
the basis of the recomrtrendat~onsol' tlic ('om~nittcc,t11c ('ompcti~ionAct, 2002 was
brought into force.

" 1he t i ~ g hlcvcl comlnlttee (in con~pct~tlon Y Irw way appc~lnlcdIn O~tq~lxr,
~ ~ I I Land IO(I0 ulder the
c h a ~ r m a n s h ~ p n f MSr V S Rayhavan
" lb~d
'"d
64
 The Committee came to a finding that the MRTP Act, 1969 to be falling short
of squarely addressing anti- competition practices.

It emphatically stated that

"......... ... the MRTP Act, in conpurison with conprririorr Ittits qf mar!v coltr~triesis
inadcqltate for fostrri~igcompelirion in tltc markt81 rrrrd rrucit>undji~rrchrcing, if not
I l e Cominitt~~:
clirninaring, counrty '.r ciomcstic ond irrtcrnarionnl rrati~~'.;'.)' desired the
focus of the new law to be on preventing anti-competitive practices [hihut ~ufucewclfnrc.
While free markets produce desired c~utmnes,they do so only wlicn protwted tivm
got11 (;I(bntpr,ririorr !AIM' is rhc rtrtubni:nrion
abuses. Therefore, 'the onlv Ii~girinrar~
cconontic )tcljiJrec.'. Based on this analysis, the Committee found tliat it is cxpcdicnt
to have a new competition law. l'lic ('oi~lpctttion Act WiiS part 01' I ~ i d i i ~cco~iomic
'~
reform and globalization process wllicll ncccssiti~tcdaligning the cconomic laws of the
country with the new economic sccnario."'

from
In succinct, thc factors tliat gnvc rise to the trigger, for the trunsli)r~ni~tions
MR'TI' Act, 1960 to Competition Act. 2002 arc:

1. The recommendations of the expert group4"

2. The recommendations of' tlic tligli I.cvcl committcc4'

3. The consunicrs among rhosc who put forward tlwr vicws and opinions hdbrc tlic
lligh lcvcl committee Ibr rcpc;iling tl~cMR'I'I' Acl inti substituting it with a ncw
competitioli law

4. Appreciation of thc fact that tllc MR'I'P Act was more conccr~~ctl
with curbing
monopolies rather thcrn with promoting compctitioti

5. Appreciation of the fact that the MR'I'I' was cnactctl to scrvc the nccds of' the
command and control economy arid tliat ;I ncw Iiiw was nccclctl

l7 P fix ol'the Kaghvan's Commlttcc rcpon

" Id.
l9Vlnnd Dhall. 2007. ' I he Ind~an(ornpttltton Act 200?'. V~nrrtlI)hnll (cd) ('ompr~~t~on
l a w Irdny,
New I k l h ~O.chrd,
. P a ~ e4499
40
Supra note 34
" Ihe Mln~\oyof Comrncrce, (~urcrnmcntof h d l d hdd \cl up dn expurl yrrrup (111 InlcrsLtlon hrlwccn
uadc and conlpcilllon pcrllcy a* an olhhocrt 111 Ihc bngdporc M ~ n ~ \ I c r ~I ka ~l l d r d t l l ~ofn thc W 1 0 I hc
expen group cubmitied 51% rcpi)n to iht' M~nlstry(11 cornmercc tn January 1099 I hc cxperl yroup oplncrl
thal a u~undand rlfecl~\c~ompctltlonlaw and a tnrnpclltlcrn A u ~ h r r r ~bccdmc
iy the need oTihc hour
65
6. Appreciation of the fact that law cannot stand still like muddy water in a cesspool
and needs to change with the changing times mwl mores for becoming responsive
to societal needs.

7. Appreciation of the fact that there is an unbridgeable mismatch between the MRTP
Act, 1969 and the chnnging eu>nomicenvimr~mentbrought a b u t by the policies
of LPG.

8. The recommendation of the Standing Committee of the I'nrliamcnt

9. R~ognitionthat Indian undertakings arc s~r~all

in s i ~ imd
e I I L to
~ rncrgc and bmw
to become competitive globally in the rules hasd International 'I"mdc Regime
establ~shedby the WTO.

10. Lastly, the fa~luresand deticienc~csof' the competitloa reglllle estnblishetl under
the MRTP Act, I969 have tilade the pol~cymakers to atldrcss Illis issuc nntl draw
right lessons to r c m ~ ~the
i y sltuatlon.

3.7 TIIE hIRTP ACT, 1969 V I S - A - V I S (:OMI'E'I'I'I'ION AC'I', 2002

AAer the Compctitron A d , 2002 calric Into force, a ilucstion IS irncr raised in
some quarters that there IS no much novelty in the Act irntl ~tIS al~iiostl ~ k etile old law
In sum and ~;ubstanceor old wlnc ~n a trcw bottlc

'fhc present rcscrtrchcr is of' thc considcrctl opinion t11:1t such irrticulation or
view is unrealistic and ~iotsupported by the factui~lgrounds. 'l'hc ('ortipctition Act,
2002 is undouhtetlly a ncw wine in a ncw hoitlc as it radic;rlly t 1 ~ p 1 1 -from
i ~ the curlier

MRTP Act, 1960 on many cou~itsby introducing novel appn~achcs for curbing
practices dctrilricntal to competitive process and culturc. 'l'hc ohjcdivc of the new Ad
is apparently reflective in its prcilmhlc which states 'An Ac.110 pror*i(f(t,keeping in view
q/ /hc coun/rv, ,/or /he c~.~~uhli,shmc.r~/
rhc c~conornicckr~rlopnien~ o/ u ('ommission IO

pre~entprircficcs lruving ud\rr.rc (fit! 011 compc>/i/ion,lo (lnd .srr.s/ain

comp~liliorrin mirrkc/s, 10p r o ~ ( /hc
~ c ~in/err.s/ r,/ c.onsrtnic,r.r and lo cn.rirre ~hc',/icc~rlom
ofrru~lecurricd on by olher participrrnls in murkcrs, in India iatd,fi~rmtrr/ar:~connrcled
~herc.ii,i~h I~CJTCIO'The Act further mandates the Competition ('ommission
or incidc~tt/i~I
to eliminate practices having adverse effect on competition, to promoic ant1 sustain
competition, protect the interests of consumers and ensure freedom of trade csrried on
by other pdcipants, in markets, in 1ndia4' Thus, it is quite obvious that the Act seeks
to realize its objectives through the establishment of the Competition Commission of
India. Besides this, the Act apparently reflects the chrulging economic environment in
India and therefore, it is better equipped to deal with the challenges and problems
arising in the Indian economy due to its increasing iotcb~ationwith the World
economy. Further, the Act makes a radical departure fnrm the MRTP Act in dealing
with cartels, merger regulation, abuse of dominance by dominant firnls. cn)ss border
restrictive trade practices and promotion of competition advocacy. Illcrcforc, it is not
an exaggeration to statc that the Compet~tionAct, 2002, ind~sputahlyrepresents a
pariidi~gnshiR in addressing the Anti-compet~tive trsdc pructices and pnniotion of
competition culture in the Indian economy when compared with the MIITP Act, 1069.
Thus tlic Hypotheses Nos: I and 2 formulated and put to ksting are fi~undto he corrccl
to a preponderant extent.

The principal diffcrenccs between tlic MRTI' Act, I000 ant1 the Cotnpctition
Act, 2002 may perhaps he a~unciatcdin the fomi of a tahlc displayed hercirl below.

3.7.1 DISTINC'I'ION BETWEEN THE MKI'I' AC'I', 1969 AND

COMPETITION ACT, 2002:

-- A -
MR'I'P Act, I969 ('ompetition Acl, 2002
I
I he prca~~ihle
to the Act to provides thi~tthe
operation of the econor~i~csy\tcm docs not kccplng 111 vlcw ot the cconomlc
clcvclopmcnt ol' the country, for the
result In the conccnlrallon of cconornlc cs~ahl~ahrncntol a Comm~ssion lo
power to the a)nimon detriment, fhr the prevent pract~ccstiilv~ngadvase dkd
control of nionoblics, br the prohibition of on compcbtloo, to promotc and sustain
cn~npct~tionIII markcto, to protect thr
monopolistic and rntrrct~vctrcldc practlcc\
Intcrrwt\i of cnnuumcrc, and lo cnvurc
and for matters conncctcd tllcrew~th or frcciiom of trnilc carncd on by other
~nc~dental thereto part~c~pants In markets, tn Ind~aand b r
mattcm co~ltlcdti! thercw~th or
~nc~iicntal thcrcto.
 Based on Post-reform liberalized
Based on Pre-reform scenario.
scenario

Baed on command and control regime Based on IibLraIizrd rtgime

Compclition concepts expressly

Competilion concepts not expressly defir
defincd.

No regulat~onof colnbinations post 109

Prnvides for n.g\lla~ioriofcc\nibinolions
MRTP Amendment Act

No advocacy role for the MKTPC

- - -- - -- -

of ('ompct~tmnComm~ssionof 11\dln
No such provisions nllil 111tlic \;IIIIC wily tlie Compcl~tion
Cornn~l\slonrnay nlso scek clplnlon of
llrs Slalulory s~ullior~l~cs

- -

Based on site I struclulc .is .ifactor

I'ompetltlon offences lrnpllclt atid not

('nmpct~l)onoiknccs explicitly dcfincd
dcfincd
- - --

('on~plcxin arrrtngcmait and language

Frowns upon mcrc domlnunce

not rncrc dominitncc
--

Kcg~stratlonof agccmcnts compulsory

agrccmonl$
 Combinations regulated beyond a high
No combinations regulation
threshold limit

I Competition Commission appointed by the / Competition Commission s c l s l d by a I

Government Collcgiutns (scurch committee)
--
Very little admlnistrat~veand finm~aal
-- ---I I
autonomy for the competition commission
--- - --

Relrtlvely more autonomy for the

Competition commission
---

1I
-----
No Compcttt~onadvocacy role for the
MRTP comnlission
tI - -
Conlpelrtlon Cornm~ss~oo
has
competition advocacy role
- -

1I
tt --
18
-"

No pcnalt~esfor offences
I -
Pcnalt~esb r ollknccs
" . --- I
1 I0 I Rcaetivc, rigid and rule of law approacll
IJnfi~rtmtle practlccs wcrc-omitted
- and
the ('on.\uoicr Forus~sest~blish~xl
-I
Unfair trade practices coverctl under the ('onsumcr I'rotcclion Act,
I O X O will have cxclusivc jurisdiction to
dcul w~ththe same.
- - --
No defin~t~on
of the tern) 'c~rtcl'~ n dhardly ('ontalnl; not only the tlclinrl~onof tile
ally provl\lons rcgulatlng dntl comh,ltlng tem~'cartel i~ndalso provlsluns aimcut
cartels. at coinbating cartcle.
- -- -

Cbnpcl~t~on
Pnnc~plcvcxpl~c~tly
Competition principles not dclincd dctinctl lor assc\slng and cvaluuting
allti-compet~l~vc
trade p ~ i a l ~ c c s

A co~nprchcnsiveanalysis of thc ('ompetition Act, 2002 with rcf'crcncc to the

MRTP Act, 1960 apparently discloses that the li)rm~rrcprcscnts ;I paradigm shifi over
the lalt~rand further, it is hassd on the chi~ngingcconomic scenario in India. 'l'hcrcbrc.
it is better ~quippcdto deal with thc challcngs and prohlans cncounteal by the Intlian
economy in the era of globalization. However, the real efficacy and effectiveness of the
competition regime under the Indin's new cornpetiticm law can be assessed only in
future as it has stated to function very recently.