Monopolies And Restrictive Trade Practices

Objective The Monopolies and Restrictive Trade Practices Act, 1969, was enacted to prevent the concentration of economic power to common detriment, control of monopolies, prohibition of monopolistic and restrictive trade practices and matters connected therewith.�

Prevention of concentration of Economic power Under this enactment, any undertaking producing one fourth or more of any type of goods and having assets of more than Rupees One Crore, is required to obtain clearance for any scheme of expansion. Initially, for the purpose of computing the total goods produced by the undertaking, goods that were exported were also taken into account. By an amendment in 1980, those goods, which are exported, are no longer taken into account while computing the total goods produced. This was in view of the objective of the enactment to control such practices within India.�

Monopolistic trade practices Section 2 (i) of the Act defines monopolistic trade practice while Section 31 provides for investigation into such practices by the MRTP Commission, either on reference by the Central Government or on receipt of information as to the carrying on of such activities by any such undertaking.� Monopolistic Trade Practices such as maintenance of prices and profits at unreasonable levels, arbitrary price increases, high expenditure on advertisement and high power salesmanship to maintain the undertaking in a monopoly situation, limiting technical detriment to common detriment or allowing quality of goods to deteriorate, are some of the situations which would call for investigation and action under this enactment.

Under Section 32 of the Act, such monopolistic trade practices are deemed to be prejudicial to public interest.� Monopolistic trade practices that may be permitted The Central� Government may permit such practice if satisfied that it is necessary for defense purposes, to ensure maintenance of supply of essential goods/services or to give effect to any terms of an agreement to which the Central Government is a party.�

Restrictive trade practices Section 2 (o) defines restrictive trade practices, which may be investigated by the MRTP Commission under Section 37 of the Act.� Restrictive Trade Practices such as differential or discriminatory incentive based on quantities, stipulation in agreement as to the prices that should be charged on re-sale, territorial restrictions and restricting terms of guarantee, bumper prize contests wherein the prices of goods are increased to cover the cost of prizes, announcing loan facilities without a guarantor while charging guarantor's commission, sale of goods for a particular price and issue of cash memos for a lesser sum, display of price-lists indicating maximum recommended rates and absence of indication that a lower price could be charged thus encouraging consumers to ask for rebates,

prohibiting film producers from selling/assigning video rights, fixing prices and discounts in concert, collusive tendering, predatory pricing and cutting prices below cost price, boycott of products of a particular company by traders, or for obtaining higher commission, and such other practices would call for investigation and action under this enactment.� Restrictive trade practices that may be permitted The Act provides for registration of agreements containing clauses that are indicated under Section 33 as a restrictive trade practice. Such practices may be permitted by the Commission under Section 37, on such steps taken by the undertaking to ensure that such practice is not prejudicial to public interest.

This however does not apply in case of restrictive trade practices under Section 2 (o). If any clause in an agreement is a restrictive trade practice as defined in Section 2 (o) the same is void and cannot be permitted.� Advantages In cases where it is proved that any undertaking is about to carry on any monopolistic, restrictive or unfair trade practice, which is likely to prejudicially affect public interest, or the interest of any trader of consumer, the Commission may restrain such undertaking from carrying on such activity by way of Injunction, which includes the power to grant exparte temporary injunction also.

The Commission is also empowered to hold investigation on receipt of a complaint by any trader, consumer or such affected party.� Disadvantages The Monopolies and Restrictive Trade Practices Commission established under Section 5 has its central office in Delhi which makes the remedies available under this Act, inaccessible to other parts of the country and also entails delay.�

UNFAIR TRADE PRACTICES UNDER THE MRTP ACT,
1969 An Unfair Method or an unfair deceptive practice adopted for the purpose of promoting the sale, use or supply of any goods or for the provision of any services, is an unfair trade practice under the Monopolies and Restrictive Trade Practices Act, 1969.

Unfair Trade Practices under the Act include, practices such as making false statements in relation to the quality, quantity (the statement could either be oral or in writing or even by visible representation), sponsorship, uses or benefits of goods, passing off old goods as new, or giving of warranty/guarantee which is not based on proper test, making public representation that purports to be a guarantee or warranty or a promise to replace or replace articles if there is no reasonable guarantee that the warranty/repair or replacement will not be carried out.�

Further practices such as misleading the public concerning the prices at which certain goods are to be sold or giving misleading facts or disparaging the goods or services of the other person, advertising the sale or services at a bargain price which is not intended to be sold at such bargain price, offering gifts or prices that are fully or partly covered by the amount charged, sale or supply of goods knowing fully well that they do not comply with the standards prescribed, hoarding or destruction of goods, etc. are also included in the definition of unfair trade practices.�

REMEDY:�
Any trade association, consumer or registered consumers' association aggrieved by such of the practices mentioned above can seek relief by filing a complaint before the Monopolies and Restrictive Trade Practices Commission, which on such complaint has powers to conduct an inquiry into such practices. Any consumer can approach the Commission irrespective of whether such consumer is a member of the consumers' association or not. The Commission can also conduct inquiry on the reference of the Central/State Government, on an application by the Director General or on its own knowledge or information.�

POWERS OF THE COMMISSION:�
The Commission may, on satisfaction that the practice is an unfair trade practice, direct that such practice shall be discontinued, and in cases in which agreements in relation to such practices are made, the Commission may also direct that such agreement shall be void or specify the manner in which it shall be modified. Further the Commission also has the power to direct that any information relating to such unfair trade practices shall be disclosed, issued or published. Where such party takes such steps to ensure that the trade practice is no longer prejudicial to public interest, or the interest of any consumer or consumers generally, the Commission may permit such party to carry on such trade.� Case Laws on Unfair Trade Practices� The following have been held to be unfair trade practices:�

CONTESTS:
Manufacturer of a cigarette announcing a contest for married couples, provided one of them was a smoker, offering prizes which would be given to three healthy, good looking couples, whose photographs would be used to advertise that brand of cigarette, held amounts to unfair trade practice, as it would give non smokers an impression that even smokers can be healthy and therefore loss or injury is implicit from such practice.

[1985 (1) Comp LJ 235 (MRTPC)] Contest to which there is no restriction on the number of entry forms that could be sent, on the condition that each entry form should be accompanied by the cash memo for having purchased certain tablets (Panjon), held unfair trade practice and cease and desist order issued. [(1987) 61 Comp Cas 352 (MRTPC)]� Contest with no restriction on the number of entry forms that could be sent, on condition that it should be accompanied by the upper part of two tooth brush covers and in which the participant was required to write a sentence on the why his family used that tooth brush, held unfair trade practice, as it was organised for promoting the sales of the tooth brush directly or indirectly [1991 (2) Comp LJ (MRTPC)], also see 1991 (3) Comp LJ 181 (MRTPC), 1992 (3) Comp LJ 304 (MRTPC)] and 1993 (2) Comp LJ 109 (MRTPC).� Contest to promote tours, announcing Maruti 100 as the highest prize, requiring p[participant to avail of any of the tours or services for a minimum of Rs.5,000/- or to deposit the sum as a condition to take part in the competition, held unfair trade practice as it was meant for promoting sale/supply of the services rendered. [1992 (3) Comp LJ 301 (MRTPC)]

LUCKY DRAWS:
Promoting sales of journals by announcing prizes to be decided by lots. Held unfair trade practice. [(1987) 62 Comp Cas 263, p 264 (MRTPC)] Announcing lucky draw to persons who purchases goods worth Rs.250/- or more, held unfair trade practice as it was in the nature of lottery and game of chance. [1993 (1) Comp LJ 311 (MRTPC)] Announcing lucky draw scheme and accordingly increasing the price of bicycles with an intention to partially or fully finance the prizes offered while giving consumers an impression that they were being given for free of cost. [1986 Comp Cas 1036, p 1041]

GIFTS AND EXCHANGE:�
Announcing exchange of old cookers for new and offering prices by way of lucky draw, whose price was fully or partially covered by the overall price of the cooker and resale price maintained by fixing the amounts which were to be paid by consumers on exchange, held amounts to unfair trade practice as it was likely to cause injury to consumers and distorts competition. [1986 (1) Comp LJ 89 (MRTPC)] Advertising gift of cold coffee shaker on the purchase of instant coffee, while the price of the shaker was partly covered by the cost of the product and further no providing the same number of shakers as those of the coffee packets resulting in consumers paying a higher price, held prejudicial to public interest, cease and desist order passed. [1993 (3) Comp LJ 229 (MRTPC)]�