CCI Updates Predatory Pricing Regulations
The Competition Commission of India (CCI) has introduced draft regulations to modernise the assessment of predatory pricing under the Competition Act, 2002. This initiative aims to align with global practices and contemporary economic theories. The proposed CCI (Determination of Cost of Production) Regulations, 2025, will replace the previous 2009 regulations. Ongoing consultations will help refine these regulations before finalisation.
About Predatory Pricing
Predatory pricing occurs when a dominant firm sets prices below production costs to eliminate competition. Once competitors are driven out, the firm can raise prices. This practice is considered anti-competitive and is explicitly prohibited under Section 4(2)(a)(ii) of the Competition Act, 2002.
Key Changes in the 2025 Regulations
The draft regulations propose changes to cost determination. The most notable shift is from using market value to average total cost as the basis for assessments. This change reflects a move towards a more comprehensive understanding of costs involved in production.
Cost Assessment Framework
The new framework focuses on average variable cost, which serves as a proxy for marginal cost in predatory pricing evaluations. This approach is intended to provide a more accurate assessment of pricing practices in various sectors, particularly in digital markets.
Sector-Agnostic Approach
One of the main features of the draft regulations is their flexibility. The CCI aims for a sector-agnostic framework that can adapt to different industries. This is especially relevant in rapidly evolving sectors like e-commerce and quick commerce.
Stakeholder Feedback and Concerns
During consultations, some stakeholders expressed concerns over the clarity of cost assessment across different sectors. The CCI responded by emphasising that the regulations maintain a cost-based assessment framework, which is consistent with international best practices.
Importance of the Update
The update to these regulations is crucial for effectively addressing complaints of unfair business practices, particularly in the fast-growing digital economy. The CCI’s revised approach aims to enhance its regulatory capabilities in scrutinising predatory pricing and deep discounting strategies.
Alignment with Global Standards
The 2025 regulations are designed to align with global competition standards. This alignment ensures that India’s competition laws reflect modern economic theories and judicial interpretations, making them more effective in the current market landscape.
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