CCI notifies new definitions to curb predatory pricing
According to the Competition Act 2002, predatory pricing is where a good or service is priced below its cost — which is to be determined through regulations like the one just issued — with the aim to reduce competition and eliminate competitors.
In February, the CCI had released a draft notification and had called for stakeholder comments. It is after reviewing these comments and incorporating some of the changes suggested that the final version has been notified.
According to the latest notification, the cost of a good or service would be assumed to be its 'average variable cost', which is the total variable cost divided by total output during a particular period. Here, the total variable cost refers to the total cost (including everything that goes into the production of that good or service) minus the fixed cost and fixed overheads attributable to the product.
However, in line with one of the stakeholder comments, the CCI decided to avoid using sector-specific definitions of cost, and instead has decided to view them on a case-by-case basis.
'The Cost Regulations 2025 establish a sector-agnostic, cost-based framework that is flexible and adaptable to various industries, including the digital economy,' the CCI said in a supplementary note issued along with the notification. 'Therefore, rather than prescribing sector-specific metrics, the framework allows for case-by-case assessment, enabling the Commission to consider the unique features and evolving dynamics of digital markets when evaluating alleged predatory conduct.'
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