CCI notifies new definitions to curb predatory pricing, Pg 12

The Hindu | May 9, 2025

Key Highlights

• The Competition Commission of India (CCI) has notified new definitions for evaluating predatory pricing, replacing sector-specific definitions with a case-by-case approach.
• Cost of a product/service is now assumed to be its “average variable cost” = Total Variable Cost ÷ Total Output.
• The updated Cost Regulations 2025 aim to deter anti-competitive pricing and are designed to be sector-agnostic, especially adaptable to the digital economy.

Detailed Insights

• Predatory pricing: When firms sell goods/services below cost to eliminate competitors and reduce market competition (defined under Competition Act, 2002).
• CCI had invited stakeholder comments on a draft earlier in February; the final version now incorporates many of their suggestions.
• Total variable cost includes all production-related costs except fixed costs and is the new benchmark to assess if pricing is predatory.
• The new framework allows for custom evaluation of digital markets, promoting fair competition while acknowledging evolving market structures.

Concepts Involved

• Average Variable Cost (AVC): A key economic metric used in pricing decisions.
• Predatory Pricing: A strategy considered anti-competitive under Indian and global competition laws.
• CCI (Competition Commission of India): A statutory body established to enforce the Competition Act, 2002 and prevent practices having adverse effects on competition.

Significance

• Reflects India's commitment to dynamic regulation amidst the growth of digital markets.
• Enhances transparency and clarity in identifying anti-competitive pricing behaviour.
• Balances regulatory oversight with sectoral flexibility to protect consumer interest and market fairness.

Mains Mock Question:

“With the rise of platform-based digital economies, competition laws must evolve to address new challenges.” Discuss in the context of the CCI’s new Cost Regulations 2025.(10 marks)