Page 185 - DMGT401Business Environment

Business Environment

Notes Introduction

The legal environment in India is such that the Indian judiciary is known for its independence
and extensive powers. The High Court or the Supreme Court in exercise of their constitutionally
conferred writ jurisdiction is empowered strike down legislation on the ground of
unconstitutionality. They can and fairly routinely intervene with executive action as well on the
ground of unreasonableness or unfairness or arbitrariness in State action.

8.1 Monopolistic and Restrictive Trade Practice (MRTP) Act

The Directive Principles of our constitution suggest that ownership and control of material
resources should be widely distributed and there should be no concentration of wealth and
means of production. With this in mind, the Monopolistic and Restrictive Trade Practice Act,
1969, was enacted so as to:
1. ensure that the operation of the economic system does not result in concentration of
economic power to the common man's detriment,
2. provide the control of monopolies,
3. prohibit monopolistic and restrictive trade practices.
The Act was amended in 1974,1980,1984,1988 and in 1991. The Act placed many restrictions on
companies having assets of more than 100 crores in respect of new projects, expansion,
diversification, mergers, and even in the appointment of directors.

8.1.1 Scope of MRTP

Before the 1991 amendment, the MRTP law sought to control the concentration of economic
power by requiring undertakings that had assets over 100 crores and/or were 'dominant
undertakings' to register themselves with the Monopolies and Restrictive Trade Practices
Commission. If such an undertaking wishes to expand and enter a new line of production or to
participate in mergers, amalgamations and takeovers, it to seek permission from the government.
MRTP controls the following aspects of economic activity:
1. Restrictive Trade Practices
2. Unfair Trade Practices
3. Monopolistic Trade Practices

4. Concentration of Economic Power.

Notes Pre-entry Condition after the 1991 Amendment
Pre-entry restriction on MRTP companies hindered the rapid growth of industry and in
turn of the economy. For rapid industrialisation, the Act was amended in September 1991
and all entry restrictions on MRTP companies i.e. companies having group assets of over
100 crores were removed. Now, the MRTP Act concentrates only on controlling and
regulating the monopolistic, restrictive and unfair trade practices and concentration of
economic power to a limited extent.

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