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 to recover losses. This anti-competitive practice is explicitly prohibited under Section 4(2)(a)(ii) of the Competition Act, 2002, making it a critical topic for competitive exams.
Key Changes in the 2025 Regulations
Shift in Cost Determination
The Competition Commission of India (CCI) has introduced draft regulations to modernise the assessment of predatory pricing. The proposed CCI (Determination of Cost of Production) Regulations, 2025, will replace the 2009 regulations. A significant change is the shift from using market value to average total cost as the basis for assessments, aligning with contemporary economic theories.
Cost Assessment Framework
Focus on Average Variable Cost
The new framework emphasises average variable cost as a proxy for marginal cost in predatory pricing evaluations. This approach aims to provide a more accurate assessment of pricing practices, particularly in dynamic sectors like digital markets, which are increasingly relevant for exam syllabi.
Sector-Agnostic Approach
Flexibility Across Industries
The draft regulations adopt a sector-agnostic framework, ensuring applicability across diverse industries, including e-commerce and quick commerce. This flexibility makes the regulations adaptable to rapidly evolving markets, a key point for aspirants studying competition law.
Stakeholder Feedback and Concerns
Addressing Clarity Issues
During ongoing consultations, stakeholders raised concerns about the clarity of cost assessments across sectors. The CCI clarified that the regulations maintain a cost-based assessment framework, consistent with international best practices, ensuring robust regulatory oversight.
Importance of the Update
Combating Unfair Practices
The updated regulations are vital for addressing complaints of unfair business practices, especially in the digital economy. The CCI’s revised approach strengthens its ability to scrutinise predatory pricing and deep discounting strategies, making it a significant update for competitive exam preparation.
Alignment with Global Standards
Adopting Modern Practices
The 2025 regulations align with global competition standards, incorporating modern economic theories and judicial interpretations. This alignment enhances the effectiveness of India’s competition laws in the current market landscape, a crucial aspect for exam-relevant current affairs.