Reasons for the Failure of MRTP

1. Excessive Govt. Control

Both large and small companies were subject to undue government influence under the MRTP Act. Obtaining government approval was a prerequisite for any corporate reorganization or takeover that the businesses had to follow. Because of these intricate processes, it was difficult for many businesses to thrive, which had an impact on end users.

2. Vague and Ambiguous Law

The phrase “restrictive trade practices” was defined in Section 2(o) of the MRTP Act to include any actions that impeded, distorted, or restricted competition. The several types of anti-competitive behavior that would be classified as offenses under the Act were not specifically stated in any section. Anti-competitive behaviors like price-fixing, predatory pricing, abuse of dominance, bid-rigging, cartels, and collusion were not defined.

3. Inefficiency of the MRTP Commission

• The MRTP Commission was set up to regulate anti-competitive practices in the country. However, even though MRTPC had both administrative and judicial functions, the members of the commission were appointed by the government itself, which cast doubt on the independence of its functioning. Moreover, the Commission was not able to perform its functions efficiently and effectively due to
• Unnecessary delays in replacing the members of the Commission.
• The unwillingness of the government to appoint members promptly or to open new branch offices

4. A Policy of Voluntary Disclosure

Lacking an institution capable of continuously monitoring market control and corporate structuring, the MRTPA apparatus heavily relied on the voluntary disclosures provided by businesses. As a result, the firms were given a great deal of latitude, which occasionally resulted in late or nonexistent registration of changes to their organizational structure. By doing this, the business was able to avoid falling under the Act’s control.

5. Export promotion at all costs.

According to Section 38 of the MRTP Act, a project enterprise with a high potential for exports in the future would have all of its Act applications approved without question, regardless of any potential monopolistic or anti-competitive implications. Because it placed an undue emphasis on exports, it disregarded any potential negative aspects of a project. It frequently resulted in higher expenses than the foreign exchange received from exports.

6. Per se Rule instead of Rule of Reason

The MRTP Act included up to 14 offenses that were deemed unlawful by definition. There was no application of the Rule of Reason notion. Even though the Rule of Reason was acknowledged by the Supreme Court in the Telco case, the regrettable 1984 Amendment, which required that all specified RTPs under Section 33 be deemed illegal by definition, again hampered this progress.

7. Dominance per se

Regardless of whether a party has misused their position, dominance was deemed bad under the MRTP Act. Dominance, or the endeavor to have 25% or more control over the market share of goods or services, was calculated mathematically. The catch was that a company was not regarded as dominant if it attained 20% or 23% of the market share at a specific point in time.

Monopolistic and Restrictive Trade Practices: The idea of consumer welfare serves as the foundation for competition rules. According to the consumer welfare criterion, while evaluating an alleged anti-competitive activity, competition regulators should take economic efficiency and total consumer welfare into account.

Therefore, to ensure a level playing field in the market, regulations should be implemented that govern how enterprises behave themselves. Therefore, the fundamental goal is competition based on merit rather than with the help of anti-competitive activity or agreements. Read this article to find out more.