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With the changes in the market after independence. There were many loopholes that led to the exploitation of general businessmen and entrepreneurs by the influential and powerful companies. This created a chaos in the market since there was no regulatory authority to curb any practices.
The customers suffered since there were only a definite set of companies that regulated the supply chain of the market. The dominant players ruled the market thus also controlled the entry and exit of the companies in the market i.e. if a new business was supposed to start then the local monopoly decided as to whether they would be allowed or not.
The customers suffered since there were only a definite set of companies that regulated the supply chain of the market. The dominant players ruled the market thus also controlled the entry and exit of the companies in the market i.e. if a new business was supposed to start then the local monopoly decided as to whether they would be allowed or not.
This created a state of distress among the normal businesses. Now due to the existence of such malpractices in the market by dominant companies the government felt that there was a need for a regulatory authority in India. To keep in check the market supply chain and further prevent any malpractices that were contrary to the sustainability of the market and against public policies.
The Enactment of Monopolies and Restrictive Trade Practices Act
India, when it became free from colonial power, was industrially very backward; in fact, it inherited an economy in a ravaged condition. Under development of the economy in many respects led the successor Government to adopt a system of planning, in the interest of transformation of the backward industrial economy into an advanced industrial economy, the planners thought it ht to allow the then established “industries to ‘develop and grow further.
Alongside; mixed economy was also developed as a concept of economic planning. No doubt, there was perceptible growth in industrialization. However, this also brought on its trails, concentration of wealth and economic power. This led to widening of the difference between the-haves and have-nots in the society.
The Government of India therefore set up the Monopolies Inquiry Commission in 1964 vide Notification dated 16th April, 1964 with following terms of reference:
Alongside; mixed economy was also developed as a concept of economic planning. No doubt, there was perceptible growth in industrialization. However, this also brought on its trails, concentration of wealth and economic power. This led to widening of the difference between the-haves and have-nots in the society.
The Government of India therefore set up the Monopolies Inquiry Commission in 1964 vide Notification dated 16th April, 1964 with following terms of reference:
(a) to inquire into the extent and effect of concentration of economic power in private hands and the prevalence of monopolistic and restrictive practices in important sectors of economic activity ‘other than agriculture with special reference to:
(i) the factors responsible for such concentration and monopolistic and restrictive practices;
(ii) their social and economic consequences and the extent to which they might work to the common detriment; and
(b) to suggest such legislative and other measures that might be considered necessary in the light of such inquiry, including, in particular, any new legislation to protect essential public interests and the procedure and agency for enforcement of such legislation.
The Monopolies Inquiry Commission submitted a detailed report in October 1965 which was well documented and revealed many facets of concentration of economic power. Following the report and the market status of that time and consequently after a lot of deliberations the Government adopted the Monopolies and Restrictive Trade Practices Act under the suggestions of the Inquiry Committee.
Thus came India’s first law on curbing any illegal trade practices in effect in December, 1969. The main purpose of the act was to check the concentration of economic power and control the growth of monopolies.
Thus came India’s first law on curbing any illegal trade practices in effect in December, 1969. The main purpose of the act was to check the concentration of economic power and control the growth of monopolies.
Problems in MRTP Act and Establishment of Competition Commission of India
However there were many limitations to the act since it was quite narrow in its scope and only focussed on suppressing the monopolies. Further after liberalization of Indian economy in 1991 new problems in the market emerged which were not limited to monopoly.
Problems like cartels, predatory pricing and anti competitive agreements which were against public policies irrespective of monopoly in the market. This gave rise to revamping of the MRTP Act to Competition Act, 2002. Furthermore a separate regulatory commission the Competition Commission of India was established to deal with all the cases related to anti-competitive practices in the market.
Now due to the existence of such malpractices in the market by dominant companies the government felt that there was a need for a regulatory authority in India. To keep in check the market supply chain and further prevent any malpractices that were contrary to the sustainability of the market and against public policies.
Problems like cartels, predatory pricing and anti competitive agreements which were against public policies irrespective of monopoly in the market. This gave rise to revamping of the MRTP Act to Competition Act, 2002. Furthermore a separate regulatory commission the Competition Commission of India was established to deal with all the cases related to anti-competitive practices in the market.
Now due to the existence of such malpractices in the market by dominant companies the government felt that there was a need for a regulatory authority in India. To keep in check the market supply chain and further prevent any malpractices that were contrary to the sustainability of the market and against public policies.
Difference Between MRTP Act and Competition Act, 2002
The objective of MRTP Act was to prevent economic power concentrated in few hands and curb monopolistic behaviour by companies in the market, prohibition of monopolistic, unfair or restrictive trade practices.
The objective of MRTP Act was to prevent economic power concentrated in few hands and curb monopolistic behaviour by companies in the market, prohibition of monopolistic, unfair or restrictive trade practices.
The whole idea behind such regulations was to protect the interests of the consumers and also avoid any concentration of wealth in a single place in the market to maintain the required equilibrium.
In contrast the objectives of the Competition Act are to prevent practices having adverse effect on competition, to promote and sustain competition in markets, to protect the interests of consumers and ensure free trade in the markets by all the businesses.
The MRTP Act did not define certain key provisions such as abuse of dominance, cartels, collusion, price fixing bid rigging, boycotts, refusal to deal and predatory pricing and the word ‘competition’ was used only at two places in the MRTP Act, first while defining restrictive trade practices under section 2(o) and, second in section 38(1)(b).
In contrast, the Competition Act defines various terms etc. abuse of dominance, cartels, bid rigging, predatory pricing, refusal to deal etc.The MRTP Act considered and labelled every “dominance” is wrong and bad for the society, while in the Competition Act only referred to the “abuse of dominance” as bad.
Therefore, the Competition Commission of India (CCI) can inquire into any agreement that is in contravention of the Act either on its own knowledge or on receipt of complaints or any reference by the Central/State Government only if dominance has been abused by an enterprise.
The MRTP Act presumed all restrictive trade practices as anti-competitive and required registration of the said agreements, in contrast, the Competition Act does not require any agreement to be registered.
Powers conferred upon the Monopolistic and Restrictive Trade Practices Commission were only re-commendatory in contrast powers conferred upon the Competition Commission of India (CCI) are vast. CCI is vested with inquisitorial, investigative, regulatory, adjudicatory and to limited extent even advisory jurisdiction.
Written by - Max Croson
Edited by - Nidhi Verma
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