CASE STUDIES under the MRTP Act 1969 and why it was replaced by the COMPETITION Act 2002

CASE STUDIES under the MRTP Act 1969 and why it was replaced by the COMPETITION Act 2002 - Transcript

CASE STUDIES under the MRTP Act 1969 and why it was replaced by the COMPETITION Act 2002
LEGAL ASPECTS OF BUSINESS

What is Monopoly

What is Restrictive Trade Practice




A restrictive trade practice is generally one which has the effect of preventing distorting or restricting competition Hear this for yourself

MRTP Act History






Hazari Committee report on industrial licensing procedure 1955 working of the licensing system has resulted in the disproportionate growth of some big houses Mahalabonis Committee report on distribution and level of income 1964 top 10 of the population cornered 40 of the income 20 of the largest firms in India owned 38 of the total built up capital of the private sector Monopoly inquiry commission setup in 1964 report in 1965 draft copy of the MRTP segregation into product wise and country wise concentration
Monopolies and Restrictive Trade Practices 1969

MRTP Act Objectives


To control monopolies and monopolistic trade practices To regulate the concentration of economic power to the common detriment To prohibit restrictive trade practices To regulate unfair trade practices

Monopolies and Restrictive Trade Practices 1969

MRTP Act


Adopted in 1969 Empowered a permanent committee MRTPC Monopoly restrictive trade practices committee The authority of the commission included


The power to direct an undertaking to discontinue a practice to pass a cease and desist order to grant temporary injunction to award compensation to direct parties to agreement to amend the same to direct parties to issue corrective advertisements etc

Monopolies and Restrictive Trade Practices 1969

MRTP Act


An inquiry or an investigation could be initiated by


an individual consumer a trade association a registered association of consumers by the government or Suo Moto by the MRTPC

Monopolies and Restrictive Trade Practices 1969

MRTP Act


Restrictive Trade Practice RTP A restrictive trade practice is a trade practice which prevents distorts or restricts competition in any manner or Obstructs the flow of capital or resources into the stream of production or Which tends to bring about manipulation of prices or conditions of delivery or which affects the flow of supplies in the market of any goods or services imposing on the consumers unjustified cost or restrictions



Unfair Trade Practice UTP An unfair trade practice means a trade practice which for the purpose of promoting any sale use or supply of any goods or services adopts unfair method or unfair or deceptive practice Unfair Trade Practices can be broadly classified into 5 categories False Representations Bargain price Freebies Non compliance of standards and Hoarding Destruction



Monopoly Trade Practice MTP Monopolistic trade practice is that which represents abuse of market power in the production and marketing of goods and services by eliminating potential competitors from market and taking advantage of the control over the market by charging unreasonably high prices preventing or reducing competition limiting technical development deteriorating product quality or by adopting unfair or deceptive trade practices

Different Trade Practices

PEICO ELECTRICALS vs UNION OF INDIA

Parties to the contract Peico Electricals Manufacturer and Seller of Philips Audio products One of its dealers operating from Sarafa Bazar Gwalior D 1 Issue Termination of contract by Peico Electricals with this dealer on grounds of failure to conduct business properly

Peico Electricals Vs UOI 1996

Appeal civil 7079 of

Important Clauses in the Contract






CLAUSE 7 The Company gives no guarantee or undertaking that it will supply the Dealer s requirements of the Company s products against its orders and in any event can accept no responsibility or liability for its failure or refusal to give supply or delay in effecting supply for any reason whatsoever CLAUSE 27 the dealer shall be free to sell the goods to customers from any part of India CLAUSE 28 Indicated that the contract between Peico Electricals and the respective dealer can be terminated if the dealer commits a breach CLAUSE 29 Provided for termination of agreement by either party by giving the other a notice period of 30 days
Peico Electricals Vs UOI 1996 Appeal civil 7079 of

Allegations on M s Peico Electricals




Peico Electricals Vs UOI 1996

Prohibition to sell same type of products as the competitors did RTP as per Section 33 1 c Supply of goods irrespective of order RTP as per Section 2 o and Section 33 1 b Imposition of territorial restriction RTP as per Section 33 1 g Fixing of prices at which D 1 should sell RTP as per Section 33 1 f Preferential treatment given to one of Peico Electricals other dealer namely M s Evergreen operating from same location as D 1

Appeal civil 7079 of

Commission s action
Interim

Injunction Clause 7 of the agreement was sought to be amended Passed a cease and desist order restraining Peico Electricals from indulging in such practices which were prejudicial to public interest in future Commission s action was in turn challenged by M s Peico Electricals in Bombay High Court
Peico Electricals Vs UOI 1996 Appeal civil 7079 of

Explanation Analysis




Charge of Territorial Restriction Supported by affidavit letters to M s Peico Electricals and ambiguity in clause 27 Charge for preferential treatment redundant Clause 7 ought to be amended Commission can t force to revive contract Clause 29 can be used to circumvent clause 28 Cease and Desist order may be justified D 1 should file for damages Section 12 B

Peico Electricals Vs UOI 1996

Appeal civil 7079 of

MAHINDRA MAHINDRA LTD Vs UNION OF INDIA






Appellant a manufacturer of jeep motor vehicles their spare parts and accessories Respondent Registrar to Monopolies and Restrictive Trade Practices Restrictive Trade Practice a trade practice which has or may have the effect of preventing distorting or restricting competition in any manner and in particular i which tends to obstruct the flow of capital or resources into the stream of production or ii which tends to bring about manipulation of prices or conditions of delivery or to affect the flow of supplies in the market relating to goods or services in such manner as to impose on the consumers unjustified costs or restrictions
Mahindra and Mahindra Vs UOI

Standard Distributor Agreement


Are clauses restricting the area meant for promotion of trade or restriction of Trade Honorable court Ruling in Telco Vs GOI Area is divided among distributors so that vehicles could be made available to far flung areas such as North east also thus to ensure equitable growth

Mahindra and Mahindra Vs UOI

TimeLine of Events

Mahindra and Mahindra Vs UOI

Mahindra and Mahindra Vs UOI

Mahindra and Mahindra Vs UOI

Contentions put forward by Appellant








The Registrar s application alleging restrictive trade practices did not set out any facts showing how the appellant s trade practices were restrictive in nature The order did not give any reasons for its decision and so was Vitiated as per court s order in Telco Case The order was a continuing order because it required the appellant not merely to cease but also desist from the practice in future even if underlying environment undergoes change Since the Commission s case was turned down in telco case and also related to area distribution thus Commission atleast needs to review his decision
Arguments

Contentions Replied by Respondent




An application of the rule of interpretation under section 55 should now be construed as a reference to the new section 100 C P C and since the new sections envisions second appeal only if a substantial question of law is involved thus the appeal was not maintainable Section 13 2 could not be used by the appellant as a substitute for section 55 Since the Appellant has already acted in a manner thus submitting himself to Commission s order thus his appeal doesn t holds validity
Arguments

Key Decisions


Difference between mere reference and incorporation in the act Interpretation of section 13 2 Legitimacy of Continuing order What constitutes Restrictive trade practice Produce Material Evidence before the Commission

Analysis

Competition Act History


The first movement in the direction of a new competition law was in the speech of the Finance Minister in 1999 The MRTP Act has become obsolete in certain area in the light of international economic developments relating to competition laws We need to shift our focus from curbing monopolies to promoting competition The government has decided to appoint a committee to examine this range of issues and propose a modern competition law suitable for our condition

Competition Act


It was adopted in 2002 It was based on the Rule of Reason The act does not frown on dominance but rather on the abuse of dominance Under this act the MRTP was to be phased out The existing cases with the MRTPC were to be transferred to the Consumer protection forums those relating to the UTP and to the Competition Commission of India or the CCI those relating to RTP and the MTP

MRTP Vs Competition Act

MRTP Vs Competition Act

Thank You


We thank you for providing us with this opportunity to present our case here

The Team B2 Group 5 Jasneet Singh 09FT 066 Neela Fernandes 09FT 095 Rajiv Rajusha 09FT 116 Ravit Madan 09FT 117 Rohan Singh 09FT 119