LEGAL ENVIRONMENT LEGAL ENVIRONMENT OF BUSINESSOF BUSINESS

With special reference to Indian With special reference to Indian ActsActs

MRTP ActMRTP Act

The Directive Principles of Indian The Directive Principles of Indian constitution suggest that ownership and constitution suggest that ownership and control of material resources should be control of material resources should be widely distributed and there should be no widely distributed and there should be no concentration of wealth and means of concentration of wealth and means of production. With this in mind, the production. With this in mind, the Monopolistic and Restrictive Trade Monopolistic and Restrictive Trade Practice Act, 1969, was enacted so as to: Practice Act, 1969, was enacted so as to:

ensure that the operation of the ensure that the operation of the economic system does not result in economic system does not result in concentration of economic power to the concentration of economic power to the common man's detriment,common man's detriment,

control the power of monopolies, control the power of monopolies, prohibit monopolistic and restrictive trade prohibit monopolistic and restrictive trade

practices. practices.

The Act was amended in The Act was amended in 1974,1980,1984,1988 and in 1991. The 1974,1980,1984,1988 and in 1991. The Act placed many restrictions on Act placed many restrictions on companies having assets of more than Rs. companies having assets of more than Rs. 100 crores in respect of new projects, 100 crores in respect of new projects, expansion, diversification, mergers, and expansion, diversification, mergers, and even in the appointment of directors. even in the appointment of directors.

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

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

Monopolistic Trade Practice is one that has Monopolistic Trade Practice is one that has

or is likely to have any of following effects:or is likely to have any of following effects:

Limiting or controlling production, supply Limiting or controlling production, supply or distribution of goods or services and or distribution of goods or services and thereby maintaining price of goods or thereby maintaining price of goods or charge or service at an unreasonable charge or service at an unreasonable price. price.

Unreasonably preventing or lessening Unreasonably preventing or lessening competition. competition.

Limiting technical development or capital Limiting technical development or capital investment or allowing quality of goods or investment or allowing quality of goods or services to deteriorate. services to deteriorate.

Unreasonably increasing prices of goods Unreasonably increasing prices of goods or services.or services.

Unreasonably increasing the cost of Unreasonably increasing the cost of production or charges for any services. production or charges for any services.

Unreasonably raising the profits on Unreasonably raising the profits on production, supply or distribution of goods production, supply or distribution of goods or services. or services.

Adopting unfair or deceptive methods to Adopting unfair or deceptive methods to reduce or prevent competition in goods or reduce or prevent competition in goods or services. services.

Restrictive Trade Practice (RTP)Restrictive Trade Practice (RTP)

A Restrictive Trade Practice is one which has, or A Restrictive Trade Practice is one which has, or may have, the effect of preventing, distorting or may have, the effect of preventing, distorting or restricting competition in any manner and in restricting competition in any manner and in particular: particular:

which tends to or obstructs flow of capital or which tends to or obstructs flow of capital or resources for production, resources for production,

which tends to impose unjustified costs or which tends to impose unjustified costs or restrictions on consumers, relating to goods restrictions on consumers, relating to goods and services by manipulation of prices, or by and services by manipulation of prices, or by conditions of delivery or to affect supplies in conditions of delivery or to affect supplies in market. market.

The deemed RTPs are as follows:The deemed RTPs are as follows:

Restrictions on buying / selling: Restrictions on buying / selling:

This means restricting person or persons This means restricting person or persons to whom goods may be sold or from to whom goods may be sold or from whom to be bought. Such as Trade whom to be bought. Such as Trade Associations that asks their members not Associations that asks their members not to deal in goods of a particular to deal in goods of a particular manufacturer. A Manufacturers manufacturer. A Manufacturers restricting its distributor to appoint arestricting its distributor to appoint a

sub-distributor or dealer without prior sub-distributor or dealer without prior permission. permission.

A manufacturer restricting its A manufacturer restricting its dealers/distributors to supply goods to dealers/distributors to supply goods to particular institutions or consumers. particular institutions or consumers.

Distributors selling goods to third party Distributors selling goods to third party without prior permission of the without prior permission of the manufacturer, etc. manufacturer, etc.

Tie in Sales or Full Line Forcing: Tie in Sales or Full Line Forcing:

This means requiring a person to purchase This means requiring a person to purchase something else compulsorily, along with goods something else compulsorily, along with goods he wants to purchase. Such as forcing dealers he wants to purchase. Such as forcing dealers to purchase orange drinks with cola drinks, or to purchase orange drinks with cola drinks, or forcing purchase of gas stoves with gas forcing purchase of gas stoves with gas connections, requiring dealers to maintain a connections, requiring dealers to maintain a minimum level of stock of the full range of minimum level of stock of the full range of products of the manufacturer, schools making products of the manufacturer, schools making it it mandatory to buy uniforms and books only mandatory to buy uniforms and books only from their own shop, etc. from their own shop, etc.

Exclusive Dealing Agreement: Exclusive Dealing Agreement: It It is is about forcing not to deal with goods other about forcing not to deal with goods other than those of the seller. For instance dealers than those of the seller. For instance dealers not to deal with similar type of products of the not to deal with similar type of products of the competitor, or buyers force manufacturers not competitor, or buyers force manufacturers not to manufacture identical goods for any other to manufacture identical goods for any other buyer without consent of the particular buyer, buyer without consent of the particular buyer, producers enter into a long term contract with producers enter into a long term contract with an artist prohibiting him from giving an artist prohibiting him from giving performances anywhere else, agreements performances anywhere else, agreements wherein a distributor will purchase goods only wherein a distributor will purchase goods only from the manufacturer or from some other as from the manufacturer or from some other as may be nominated by him. may be nominated by him.

Collective Price Fixation and Tendering: Collective Price Fixation and Tendering:

This This is is a collective agreement to a collective agreement to purchase or sell or to tender only at purchase or sell or to tender only at agreed prices or terms. This agreed prices or terms. This is is called called 'cartel'. It is also called the Knock Out 'cartel'. It is also called the Knock Out Agreement. For instance when tyre or Agreement. For instance when tyre or cement manufacturers, or some trade cement manufacturers, or some trade associations increase prices or restrict associations increase prices or restrict supply uniformly and simultaneously, by supply uniformly and simultaneously, by mutual agreement. mutual agreement.

Discriminatory Dealing:Discriminatory Dealing:Giving Giving concessions or benefits on the basis of concessions or benefits on the basis of turnover or giving huge discount to large turnover or giving huge discount to large buyers will be considered as RTP, if such buyers will be considered as RTP, if such discounts are injurious to competition. discounts are injurious to competition. However, discounts are very common in However, discounts are very common in business and many discounts are not business and many discounts are not considered as discriminatory as cash discount considered as discriminatory as cash discount on prompt payment, discount to different on prompt payment, discount to different classes of customers as government and classes of customers as government and private customer, incentive to increase sales, private customer, incentive to increase sales, newspapers charging different rates for newspapers charging different rates for different pages of newspaper, etc. different pages of newspaper, etc.

Resale Price Maintenance: Resale Price Maintenance:

This means not allowing resale below a This means not allowing resale below a certain price or not to sell above a certain price or not to sell above a particular price. If maximum price particular price. If maximum price is is indicated, the dealer should be free to indicated, the dealer should be free to charge below the indicated price. charge below the indicated price.

Restriction on Output or Supply: Restriction on Output or Supply:

This means an agreement to limit, This means an agreement to limit, withhold or restrict the output or supply withhold or restrict the output or supply or any goods or allocate any market or or any goods or allocate any market or areas for disposal of goods. areas for disposal of goods.

Restriction on Manufacturing Process: Restriction on Manufacturing Process:

This means an agreement not to use a This means an agreement not to use a particular method, machinery or process particular method, machinery or process in the manufacture of goods. in the manufacture of goods.

Price Control Arrangement: Price Control Arrangement:

This means an agreement to sell goods This means an agreement to sell goods with a view to eliminate competition or with a view to eliminate competition or any competitor. any competitor.

Restriction on Buying: Restriction on Buying:

To restrict the class or number of To restrict the class or number of wholesalers, producers or suppliers for wholesalers, producers or suppliers for whom goods may be bought whom goods may be bought is is an an restrictive trade practices. restrictive trade practices.

Collective Bidding: Collective Bidding:

This means an agreement among the This means an agreement among the contenders for bid to be offered at contenders for bid to be offered at auction or not to be bid at auction. auction or not to be bid at auction.

Agreement Declared by government to be Agreement Declared by government to be restrictive: restrictive:

The government has powers to declare any The government has powers to declare any agreement as restrictive on the agreement as restrictive on the recommendation of the Commission. recommendation of the Commission.

Besides all these, many others are treated Besides all these, many others are treated as RTP. Such as Dumping of goods, as RTP. Such as Dumping of goods, deficiency in insurance services, insisting deficiency in insurance services, insisting on collection of gas cylinders from shop, on collection of gas cylinders from shop, accepting deposits for supply without any . accepting deposits for supply without any . possibility of supply, not providing a house possibility of supply, not providing a house as promised, failure to refund deposits, as promised, failure to refund deposits, wide variations in prices in different wide variations in prices in different regions, etc., are treated as restrictive regions, etc., are treated as restrictive trade practices. trade practices.

Unfair Trade PracticeUnfair Trade Practice

The practices which are 'Unfair Trade The practices which are 'Unfair Trade Practices' as per the act are: Practices' as per the act are:

False representationFalse representation False Offer or Bargain PriceFalse Offer or Bargain Price Offering gifts, prizes etc. and conducting Offering gifts, prizes etc. and conducting

promotional contests with the intention of promotional contests with the intention of not providing themnot providing them

Not complying to Product Safety Not complying to Product Safety StandardsStandards

Hoarding or Destruction of GoodsHoarding or Destruction of Goods

Governing BodyGoverning Body

MRTP Commission MRTP Commission It is the commission that governs the It is the commission that governs the MRTP ActMRTP Act

Director General of Investigation and Director General of Investigation and Registration. Registration.

CONSUMER PROTECTION CONSUMER PROTECTION ACT 1986ACT 1986

In the Indian scenario the following factors In the Indian scenario the following factors can said to be reasons for the rise of the can said to be reasons for the rise of the consumer protection movement : consumer protection movement :

Consumer Information Gap: Consumer Information Gap: The consumer who is buying a television is not The consumer who is buying a television is not an electronic engineer. Similarly, a person an electronic engineer. Similarly, a person buying the services of doctor or advocate does buying the services of doctor or advocate does not know whether he is receiving the right not know whether he is receiving the right service or not. He comes to know their worth service or not. He comes to know their worth only after communing the product or availing of only after communing the product or availing of the services. These things exit because of a the services. These things exit because of a lack in consumer information. They also do not lack in consumer information. They also do not have the time, interest, capacity, and have the time, interest, capacity, and competence to acquire authentic information competence to acquire authentic information and to make the informed decisions. and to make the informed decisions.

Pattern of Communication: Pattern of Communication: The impact of alternation patterns of The impact of alternation patterns of communication which include advertising communication which include advertising through mass media like the radio, television, through mass media like the radio, television, newspapers and cinema, have actually newspapers and cinema, have actually towards widening on increasing the information towards widening on increasing the information gap. The media, which provides for information gap. The media, which provides for information is easily manipulated by marketing experts and is easily manipulated by marketing experts and business stalwarts. This results in consumer business stalwarts. This results in consumer exploitation, which. is extenuated by the exploitation, which. is extenuated by the increasing impersonalization of communication increasing impersonalization of communication structures and through the development of structures and through the development of new technologies. In such a scenario, the new technologies. In such a scenario, the consumer lands in utter confusion that consumer lands in utter confusion that increases his distress. increases his distress.

Performance Gap: Performance Gap: Being influenced by the communication provided Being influenced by the communication provided by the company, the consumer purchases by the company, the consumer purchases products and services with certain expectations. products and services with certain expectations. In many cases, the quality provided and the In many cases, the quality provided and the promises made in communication or while promises made in communication or while selling do not meet his expectations. The selling do not meet his expectations. The consumer has to live with of product failure consumer has to live with of product failure almost everyday. Since the problem is manifold almost everyday. Since the problem is manifold and arises almost daily, it is difficult for an Indian and arises almost daily, it is difficult for an Indian consumers to move to the court for redressal of consumers to move to the court for redressal of his problems. This has also given rise to the his problems. This has also given rise to the demand for better protection to the consumers demand for better protection to the consumers all around. all around.

Absence of informed Participation: Absence of informed Participation: The absence of consultation with the The absence of consultation with the

consumer or of their representatives in consumer or of their representatives in policy formulation often results in policy formulation often results in implementation of certain decisions that implementation of certain decisions that adversely affect consumers. In most adversely affect consumers. In most cases, undertakings and institutions are cases, undertakings and institutions are seen avoiding the . The absence of a clear seen avoiding the . The absence of a clear doctrine in this regards has generated doctrine in this regards has generated strong dissatisfaction among consumers strong dissatisfaction among consumers and has created an environment in which and has created an environment in which consumerism thrives. consumerism thrives.

Budget Squeeze and Inflation: Budget Squeeze and Inflation: There are two factors, that contribute to There are two factors, that contribute to the budget squeeze. The first one is the budget squeeze. The first one is increased income and the sociological increased income and the sociological forces, which have created expectations forces, which have created expectations for a better lifestyle. This in turn, for a better lifestyle. This in turn, demands new producers requiring new demands new producers requiring new expenditure for products and services. expenditure for products and services. Secondly, inflation absorbs a major Secondly, inflation absorbs a major portion of increased income resulting in portion of increased income resulting in retarding people's ability to buy. It has a retarding people's ability to buy. It has a direct impact on the cost of living. direct impact on the cost of living.

Poverty of Consumers: Poverty of Consumers:

The Poor and illiterate people are The Poor and illiterate people are widespread in India and they suffer the widespread in India and they suffer the most from frauds, excessive prices, most from frauds, excessive prices, exorbitant credit charges, and poor quality exorbitant credit charges, and poor quality of merchandise and services. They lack of merchandise and services. They lack education, consumer education in education, consumer education in particular, and are unable to improve their particular, and are unable to improve their purchase decisions. purchase decisions.

Consumer RightsConsumer Rights

Every year, March 15 is observed as "World Every year, March 15 is observed as "World Consumer Right Day". Its significance is that in Consumer Right Day". Its significance is that in 1962 on this day John Fitzgerald Kennedy, the 1962 on this day John Fitzgerald Kennedy, the then president of the US declared four consumer then president of the US declared four consumer rights. Later, International Organization of rights. Later, International Organization of Consumers Union (IOCU) added three more Consumers Union (IOCU) added three more rights to the Ii t. The government of India too rights to the Ii t. The government of India too included these rights in its 20-point programme. included these rights in its 20-point programme. These have also been incorporated in the United These have also been incorporated in the United Nations Charter of Human Rights. These are: Nations Charter of Human Rights. These are:

Right to Safety Right to Safety Right to be InformedRight to be Informed Right to Choose Right to Choose Right to be Heard Right to be Heard Right to Redress Right to Redress Right to Healthy EnvironmentRight to Healthy Environment Right to Consumer Education Right to Consumer Education

The foremost objective of the Consumer The foremost objective of the Consumer Protection Bill is to Protection Bill is to

provide for better protection of the provide for better protection of the interest of the consumer and for that interest of the consumer and for that purpose, purpose,

make provisions for the establishment of make provisions for the establishment of Consumer Protection Councils and other Consumer Protection Councils and other authorities for the settlement of authorities for the settlement of consumer disputes and for matters consumer disputes and for matters connected therewith. connected therewith.

The term 'consumer' is defined in Section The term 'consumer' is defined in Section 2(d) of the Consumer Protection Act, 1986 2(d) of the Consumer Protection Act, 1986 in two parts. in two parts.

One is a consumer who purchases goods One is a consumer who purchases goods

The other is a person who hires services The other is a person who hires services

The Act is intended to protect following The Act is intended to protect following

rights of the consumers [under Section 6]:rights of the consumers [under Section 6]:

The right to be protected against The right to be protected against marketing of goods, which are hazardous marketing of goods, which are hazardous to life and property. to life and property.

The right to be informed about the The right to be informed about the quality, quantity, potency, purity, quality, quantity, potency, purity, standard and price of goods to protect standard and price of goods to protect against unfair trade practices. against unfair trade practices.

The right to be assured, and wherever The right to be assured, and wherever possible, access to a variety possible, access to a variety of of goods at goods at competitive prices. competitive prices.

The right to be heard and to be assured The right to be heard and to be assured that consumers' interests will receive due that consumers' interests will receive due consideration at appropriate forums. consideration at appropriate forums.

The right to seek redressal against unfair The right to seek redressal against unfair trade practices or unscrupulous trade practices or unscrupulous exploitation of consumers. exploitation of consumers.

The right to consumer education. The right to consumer education.

Grounds for Appeal for the Jurisdiction Grounds for Appeal for the Jurisdiction

to Redressal Forumsto Redressal Forums

False representationFalse representation False Offer or Bargain PriceFalse Offer or Bargain Price Offering gifts, prizes etc. and conducting Offering gifts, prizes etc. and conducting

promotional contests with the intention of promotional contests with the intention of not providing themnot providing them

Not complying to Product Safety Not complying to Product Safety StandardsStandards

Hoarding or Destruction of GoodsHoarding or Destruction of Goods

Who can file a complaintWho can file a complaint

Consumer himselfConsumer himself Legal representative, heirs of the Legal representative, heirs of the

consumerconsumer Any voluntary organizationAny voluntary organization Central or state governmentCentral or state government