MRTP Act repealed and is replaced by the Competition Act, 2002

MRTP Act repealed and is replaced by the Competition Act, 2002, with effect from September 1, 2009

The Ministry of Corporate Affairs, Government of India has issued a Notification dated 28^th August 2009, whereby the most controversial the Monopolies and Restrictive Trade Practices Act, 1969 (“the MRTP Act”) stands repealed and is replaced by the Competition Act, 2002, with effect from September 1, 2009.

As you would recall, the MRTP Act was a grim reminder of the “licence-quota- permit-raj” of 1970’s  & 1980’s. The Act had become redundant post July 1991 when the new economic policy was announced and Chapter III of the MRTP Act dealing with restrictions on M&A activities was made inoperative. The MRTP Commission will continue to handle all the old cases filed prior to September 1, 2009 for a period of 2 years. It will, however, not entertain any new cases from now onwards.

I wish to clarify that the provisions relating to M&A transactions (Sections 5 & 6 of the new Competition Act dealing with regulation of combinations) are yet to be notified. As of now, there is no clarity as to when these provisions would be made effective. It is also not clear whether these new provisions will be applicable in cases where definitive agreements have been signed before the notification but closing of the transaction has not happened.

It would, therefore, be advisable to put a clause in all M&A transaction documents executed from now onwards that the closing of the transaction would be subject to any prior clearance that may be required from the Competition Commission of India under the provisions of the Competition Act, 2002, if applicable.

We are giving below details of the transitional provisions:-

Date: September 1, 2009

Subject Transitional Provisions – the MRTP Act, 1969 to the Competition Act, 2002 w.e.f. September 1, 2009)

The Ministry of Corporate Affairs, Government of India has issued a Notification dated 28^th August 2009, whereby the most controversial the Monopolies and Restrictive Trade Practices Act, 1969 (“the MRTP Act”) stands repealed and is replaced by the Competition Act, 2002, with effect from September 1, 2009.

The following transitional provisions would apply as provided in Section 66 of the Competition Act, 2002:-

1.       MRTP Commission

a) The MRTP Commission will continue to exercise jurisdiction and power under the repealed MRTP Act in respect of any case or proceeding filed before 1 September 2009, for a period of two years. It will not, however entertain any new case arising under the MRTP Act on or after 1 September 2009.

b) Upon the expiry of the specified two year period, the MRTP Commission shall stand dissolved.

2.       Transfer of pending cases

Upon the expiry of two years from 1 September 2009, cases pending before the MRTP Commission will be transferred as follows:-

a) Monopolistic or restrictive trade practice cases: All pending cases pertaining to monopolistic or restrictive trade practices, including cases having an element of unfair trade practice, shall stand transferred to the Competition Appellate Tribunal, which shall adjudicate such cases in accordance with the provisions of the repealed MRTP Act.

b)  Unfair trade practice cases: All pending cases relating solely to unfair trade practices shall stand transferred to the National Commission as constituted under the Consumer Protection Act, 1986, which may in turn transfer such cases to a State Commission constituted under the said Act under circumstances it deems appropriate. These cases will be dealt with by them in accordance with the provisions of the Consumer Protection Act.

c)  Cases relating to giving false or misleading facts disparaging the goods, services or trade of another person under the MRTP Act: All such pending cases shall be transferred to the Competition Appellate Tribunal which will be dealt in accordance with the provisions of repealed MRTP Act.

3.       Investigations/proceedings undertaken by the Director General under the MRTP Act

With effect from 1 September 2009, all pending investigations and proceedings by the Director General relating to:-

a)  Monopolistic/ restrictive trade practices will be transferred to the Competition Commission of India (CCI), who may conduct such investigations/ proceedings in any manner it deems appropriate.

b) Unfair trade practices will be transferred to the National Commission under the Consumer Protection) Act 1986.

c)  Cases giving false or misleading facts disparaging the goods, services or trade of another person will be transferred to the CCI.