CONCENTRATION

OF
ECONOMIC POWER
 Economic Power : Condition of having
sufficient productive resources at command that give
the capacity to make and enforce economic decisions, such
as allocation of resources and apportioning of goods and
services.
 Concentration of Economic Powers : It is the condition
when most of the economic powers reside in the hands of a
few firms or a single firm having monopoly in the market.
 MRTP Firms : Firms having assets above Rs.100 crore.
 Dominant Undertaking : It is that which controls at least
one fourth production or market of a product and has
assets of at least Rs.3 crore.

MEANING
 During 1960’s and 1970’s concentration of power
was at the top. Largest business in terms of
assets was Tata followed by Birla. The third
largest business house was Martin Burn, which
was only one fourth of the top two business
houses

 During 1980’s and 1990’s there was extreme

concentration at the top. As in Dec 1991, the
largest business house in terms of assets was
Tata, followed by Birla and Reliance

GROWTH
 In post liberalization period 1991-2009, the private
sector corporate giants flourished. The largest
private sector company in terms of assets and net
sales was Reliance Industries followed by Tata Steel
and Hidalgo.
 Government of India undertook some measures to
curb and restrict the growth of monopoly power in
country. Government passed the MRTP Act in 1969
and amended it in 1980 and 1984.
 Since 1991, with increasing trends of liberalization in
the economy , controlling concentration of economic
power is no longer on the agenda of the government
 Industrial policy resolution of 1956-1991-:
It gave big scope to large houses in the private sector to
enter into various industries, these industries were heavy
electrical plants, machine tools, basic chemicals and drugs
etc. Most of these were highly capital intensive and only
large business houses can arrange money for them
 Loopholes in administration proceedings-:
Administrative factors have enabled the large houses to
grow despite of the national objective of curbing
monopolies. The faulty tax system, loopholes in control
mechanism in respect of foreign exchanges, imports etc
has helped concentration of economic power.

CAUSES
 Concentration of economic power in licensing
policies and procedure
Licensing procedures were responsible in leading to a
situation wherein large monopoly houses could grow
fast. The Dutt Committee(1969) blamed licensing
policy for concentration of economic power.
Erodes competitive attributes
Monopolies obstructs the free play of market forces of
demand and supply, free exchange etc
Harms social welfare
The unfair trade practices like hoarding, black marketing,
discrimination in discounts, dictating dealer to sell
product at a fixed price etc have harmed the social
welfare
Strains social and political life
The growth of monopolies and concentration of economic
power makes its impossible to achieve the aim of
decentralization

CONSEQUENCES
 MonopoliesAnd Restrictive Trade Practices
Act (MRTP Act) and Amendments in 1980
and 1984
 Competition Act 2002

GOVERNMENT MEASURES TO REGULATE

CONCENTRATION OF ECONOMIC POWER
 Inthe pre-1991 period the declared policy of the
government was to curb and restrict the growth of
monopoly power in the country for this purpose, the
government imposed restrictions on the entry of large
business houses in a number of industries, set up
a large number of industries in the public sector, and
undertook various measures to encourage small and
medium industries. The most important in this phase
was passing of the MRTP Act (Monopolies and
Restrictive Trade Practices Act) in 1969 and
the setting up of the MRTP Commission in 1970.Since
1991, the focus has shifted from controlling
monopolies to promoting competition.

MRTP Act
Large and dominant undertaking had to take
prior approval of the central government for
the establishment of new undertaking mergers
amalgamations takeovers act
The act provided for regulation and prevention
of monopolistic trade practices. Monopolistic
trade practices are those practices which have
or are likely to have the affect of preventing or
distorting competition or maintaining prices at
unreasonably high levels.

MAIN PROVISION OF MRTP

ACT 1969
The act empowers the MRTP commission to
enquire into any restrictive practice and to issue
suitable orders thereof to curb it Restrictive trade
practice is a trade practice which has or may have
the effect of preventing competition in any
manner
The MRTP act empowers the commission to
enquire into unfair trade practices an unfair trade
practice may be defined to a mean a trade
practice indulged in by a producer of a good or
service the MRTP act retarted the growth of both
domestic and foreign competition.
AMENDMENTS IN THE
MRTP ACT
ACCORDING TO NIP
1991
Definition of ‘good’ enlarged - definition of the word ‘good’
was enlarged to include insertions of misleading statements in
the company proportion while proposing a new issue of share of
debentures.
Definition of ‘service’ enlarged- the definition of ‘services’
was enlarged to include chit funds and the real estate
transactions.
More strict penalty provisions- penalty provisions with
regard to unfair trade practices were more strict.
Amended definition of unfair trade practices- amended
definition of unfair trade practices meant trade practices which,
for the purpose of permitting the sale, use, supply, or provision
of any goods/services, “adopts any unfair method or deceptive
practice”.
Scrapping the asset limit- The New Industrial Policy 1991
scrapped the asset units for MRTP companies. It meant that the
company no longer needed prior permission of the commission
for investment decision.
 1st October 1999, The Government Of India appointed a
high level committee on competition policy and
competition law to advice a modern competition law for
the country in the international developments and to
suggest a legislative framework, which may entail a new
law or appropriate amendments to MRTP act. The
company presented its competition policy to the
government in may 2000. The draft competition law was
drafted and presented to the government in December
2000.
After some refinements, following extensive consultations
and discussions with all interested parties, the parliament
passed in December 2002, the new law, namely The
Competition Act 2002.

COMPETITION ACT 2002

THE INDUSTRIES(DEVELOPMENT AND
REGULATION) ACT 1951- may no longer be
necessary except for location, for environmental
protection and for and for monuments and national
heritage protection consideration etc.
The industrial dispute act 1947- and the
connected statues need to be amended to provide
for an easy exit to the non-viable, ill managed and
inefficient units subject to their legal obligations in
the respect of their liabilities.

SALIENT FEATURES OF NEW

COMPITITION ACT 2002
 The board of industrial finance & restructuring
(BIFR)- formulated under the provisions of sick
Industrial Companies Act 1983 should be abolished.
 World trade organization(WTO)- there should
be necessary provision to examine and adjudicate
upon anti- competition practices that may
accompany or follow developments arising out of
the implementation of WTO agreements.
 MRTP act suggested that
The MRTP act 1969 may be repealed and the MRTP
commission wound up.
The pending UTP cases in the MRTP commission
may be transferred to the concerned consumer
courts under the consumer protection act 1986.
 Anti-competition Agreement
 Abuse Of Dominance
 Combinations Regulations
 Competition Advocacy

COMPONENTS OF
NEW COMPETETION
ACT 2002
Dominant positions has been appropriately defined
in the act in terms of the position of strength
enjoyed by an enterprise in the relevant market.
It is worth mentioning that the act does not
prohibit or restrict enterprises from coming into
dominance. All that the Act prohibits is the abuse
of that dominant position.
The act therefore targets the abuse of dominance
and not dominance per se, This is indeed a
welcome step, a step towards a truly global and
liberal economy.

ABUSE OF DOMINANCE
 Firms enter into agreement, which may have the
potential of restricting competition.
 There are two types of agreements
• Horizontal agreements- They are among competitors
and are more likely to reduce competition. It includes
membership of cartel, are presumed to lead to
unreasonable restrictions of competitions and are
therefore presumed to have a significant adverse
effect on competition.
• Vertical agreements- They are those relating to an
actual or potential relationship of purchasing or selling
to each other.

ANTI-COMPETITION
AGREEMENT
 The Competition Act is designed to regulate the
operation and activities of combinations, a term which
contemplates acquisition, mergers , or amalgamations.
 The act has made the pre-notification of combinations
voluntary for the parties concerned.
 If the parties to the combination choose not to notify
the CCI, as it is not mandatory to notify , they run the
risk of a post-combination act by the CCI, if it is
discovered subsequently , that the combination has a
significant adverse effect on competition.
 There is a rider that the CCI shall not initiate an inquiry
into a combination after the expiry of one year from the
date on which the combination has taken effect.

COMBINATIONS
REGULATIONS
 Competition advocacy creates a culture of competition.
 The regulatory authority under the act namely,
Competition Commission of India (CCI), in terms of the
advocacy provisions in the act , is enabled to participate
in the formulation of the country’s economic policies and
to participate in the reviewing of laws related to
competition at the instance of the Central Government.
 The Commission will therefore be assuming the role of
competition advocate , acting pre-actively to bring
about Government policies that lowers barriers to
entry , that promote deregulation and trade
liberalization and that promote competition in the
market place.

COMPETITION ADVOCACY
 • 1. Its focus was on controlling • 1.Its focus is on ensuring free
the concentration of economic and fair competition in the
power. 02 market.
• 2. It considered dominance as 20 • 2.It considered abuse of
bad. dominance as bad.
• 3. In this, registration of T • 3. In this, registration of
69 agreement was compulsory. AC agreement is optional.
• 4. It did not define competition • 4. It defines competition
19 offences ON offences.
T • 5.. It has no penalty for • 5. . It has provisions for
penalties for offences.
offences.
ITI
AC • 6. It was rigid and reactive. ET • 6. It is flexible and proactive.
TP • 7. It covered unfair trade MP • 7. It does not cover unfair
practices. trade practices.
MR CO

DIFFERENCE
Prepared by
Rohit Aggarwal
Kritika Chohan
Diksha Oberoi
Jaspreet Nandha
Danya Jain

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