Explain MRTP Act in brief

 Explain monopolies and Restrictive Trades practices Act. (MRTP) Act in brief. 

MRTP ACT (1969):

    Enactment: The Monopolies inquire Commission had submitted its report and recommendation in the form of a draft bill in 1965. With his draft as the basis, the Monopolies and Restrictive Trade Practices Bill was present to Rajya Sabha in August 1967. It was passed by parliament in December 1969.

Objectives:                                      

1. To ensure that the functioning of the economic system does not result in concentration of economic power to the common determent.
2. To control such monopolies and restrictive trade practices as are injurious to public welfare. For counteracting the adverse effects of concentration of economic power, the Act seeks to invest the central government with wide power, inter alia, to investigate and control mergers as well as expansions.

MRTPC:

    As regard to monopolies and restrictive trade practices, the Act seeks to establish a permanent statutory commission to be called as the Monopolies and restrictive Trade practices Commission (MRTPC). It will consist not less than two and not more than nine members including the chairman. It will perform investigation and control of monopolies and all restrictive trade practices. It will available for an advice on matter relating to concentration of economic power. In relation to monopolistic practices, it will have only advisory status with no powers of enforcement. In relation to restrictive trade practices its status will be that of judicial court with powers of enforcement. In matter to pertaining to concentration of economic power (expansions of undertaking, setting up of new undertaking, and mergers), power of investigation and enforcement shall vest with government which will decided heather or not to refer to a particular case to MRTPC for advice which, again, will not be binding on government. On August 2, 1970, government set up a three-man, monopolies commission and for prohibiting to prevent concentration of economic power, for the control of monopolies and for prohibiting monopolies for restrictive trade practices by controlling the activities dominant or large undertaking as defined under the Act.

Officials:                                                                                                      

    The monopolies and restrictive trade practices Act provide for the appointment of two  

1. The Director of Investigation: the function of the director of investigation is to carry out preliminary investigation into the complaints of restrictive practices with a view to establishing their veracity and importance.
2. Registrar of Restrictive Trade Practices; The Registrar will mainly look after the registration of registration of restrictive trade agreements.

Dominant Monopolies Undertaking:

    The Act defines a dominant undertaking as one which, either by itself or along with inter-connected undertakings, controls not less than one-third of items of productions, supply or distribution of a commodity, or provides or otherwise control not less than one-third of any services rendered in India. The Act also defines a monopoly undertaking as any dominant undertaking which by itself, or together with not more than two other independent undertakings, supplies or distributions or otherwise controls not less than half of total goods or services.

Criticisms of the Act:

    The monopolies and restrictions of trade practices Act is the latest in the armory of the state to regulate the corporate sector. Main criticism against this legislation are as follows:

 It mixes up considerable about concentrations of economic power and monopoly: 

    The provision of the Act dealing with concentration of economic power seek to regulate expansions, mergers, amalgamations and take over, and appoint of directors in respect of (a) dominant undertaking having cores and more: and (b) undertaking which by themselves or together which inter-connected undertaking have assets of not less than Rs. 20 cores in value. It also seeks to regulated starting of new undertaking which would become inter-connected undertaking of such existing undertaking, the total assets of securing approval of the union government. In actual practices, the delay, will seriously handicap the growth of the so-called dominant undertakings or industrial groups. This would postpone and delay development and the basic objectives of the Act will not be attained.

 Industrial Retardation: 

    Monopolies on economy terms implies an industrial unit which can control production in industrial as to restrict competitive focus in the market and have a prices structure based on various non-competitive considerations and devices like manipulation of production. In India, there does not seem to be a place on planned kind because industrial development is expected to take place on planned lined. Merely because some individuals or companies are able to do better than this, there should be no room for us to condemn them as monopolies or monopolies. Already industry has to contend with a variety of controls such as industrial licensing, import controls, clearance for capital issues and so on. To impose further restrictions on expansions and diversification from the angle of this Act is bound to retard rather than acceleration industrialization.

    Going in the Reverse Direction: 

    The world trend is towards larger companies, amalgamations and mergers of unit. They are aimed at from improving competitive strength and technical efficiency.

To harmonies with anti-monopoly legislation:  

    The provision of MRTP Act about diversification and expansion of large undertaking cannot be harmonies with-anti monopoly legislation the world over. Nowhere else has monopoly legislation takes assets per se are not considered a sound criterion for determining monopolies power. The only valid consideration is the functioning of big companies against the interest of the consumers.

  Exemption of public sectors: 

    All public undertaking controlled, manage or sponsored by government and the trade practices in which they participate as parties are exempt from the provision of the Act. This is undesirable. Many public undertakings complete with private firms in the same product. Many of them enjoy dominant positions in their respective markets. The profit motive is very much a part of their operation. They take advantage of their dominant market position to adopt discriminatory and restrictive practices unfair to customers and/or competitor. They are subject to the danger of losing the urge for improving efficiency and productivity. They should have been brought within the scope of at least the provision regarding the investigation and the control of monopolistic and restrict trade practices.

    Reconciliation with Government’s Other Economic polices: 

    Due to this defect enforcement of this law has landed Government in embarrassing situations. For instance, how will it reconcile the provision of this legislation with the policy of enforced voluntary price fixing thought producers’ associations in vanaspati or a with the working of joint plants committee in steel? How will it reconcile the provision for curbing concentration with, the need for achieving investment targets particularly in industries which may call for allowing big business house to expand existing unites or set up new unites? Hence, the government has been considering the amendment of section 27 of the Act allowing the expansion of such concerns.

 No Knowledge of economics of business con no centration: 

    some rudimentary information and analysis of the economy effects of concentration of economic power are absolutely essential as the intention behind the Act is not to control concentration per set but control it only to extend that its effects are detrimental to the public interest. The commission itself complains in its annual report for the year 1971 only 10 references were received in 1972. A number of cases of large magnitude and importance to economy were decided by the central government without reference of the commission. the commission is not able to understand the policy in this respect. It cannot help feeling that there is some incongruity in that. Sometime cases not involving any major issue are referred to the commissioner while others are not referred. The present chairman of the commission, justice J. L. Nain confirmed the general impression about irrelevance of the commission when he stated that the general impression about the even a less important role than what the Act envisages. One of the members of the commission has observed that “people give us too much credit. We are not that effective because the number of cases covered by the MRTP constitutes a very small part of total industrial growth.”

    Only 4 per cent of the industrial license application come under the provision of the MRTP Act. Of their 4 per cent, less than 10 per cent are referred to the Monopolies commission. Of the number of proposals referred to the commission, those rejected from less than 10 per cent. Even a cursory cost benefit study of the Monopolies commission and the attendant paraphernalia can lead to the conclusion to disband the commission and scrap the Act. The existence of the act and the commission only serve to create a false impression that the government is concerned about checking the growth of the large business that the houses and the concentration of economic power.

Proposed Reorganizations:

    In march 1973, Section 27 of the MRTP Act was proposed to be amended to provide for the dilution of control of business groups on companies and to break up big conglomerates into function units. This decision had been taken as part of the new industries policy aimed at the twin objectives of preventing concentration of economic and allowing the expansion of industries units in priority sectors by assuming power to break interconnections where necessary and amalgamations where needed

                                                                                                                                                         After gaining experience in clearing application of larger industrial houses, particularly the difficulties faced in reconciling the conflicting aims of preventing of concentrations of economic power and increasing the production capacity, an official committee set up by the minister of industrial/development also endorsed the above suggestion.

In march 1973 the union Law minister has announced that he would soon introduce a bill to amend the MRTP Act.