Context and Objective
- The Competition Commission of India (CCI) has notified new definitions of costs to identify predatory pricing more accurately.
- Aims to strengthen fair competition and curb anti-competitive practices, especially in emerging sectors like the digital economy.
Relevance : GS 2(Governance)
What is Predatory Pricing?
- As per Competition Act, 2002, predatory pricing refers to selling below cost with an intent to:
- Eliminate competitors, and
- Reduce competition in the market.
- The definition of “cost” is now formally addressed through this regulation.
New Cost Definition Introduced
- CCI defines cost as “Average Variable Cost (AVC)”:
- AVC = Total Variable Cost / Total Output in a given period.
- Variable cost includes all expenses excluding fixed costs and fixed overheads directly attributable to the product or service.
Flexible, Sector-Agnostic Approach
- CCI has chosen to not use sector-specific definitions of cost.
- Each case will be assessed individually, considering market dynamics, especially in complex and evolving sectors like tech and digital platforms.
Response to Stakeholder Feedback
- The notification follows a draft release in February 2025 and public consultation.
- CCI incorporated suggestions from stakeholders, notably:
- Avoiding rigid, sector-specific cost metrics.
- Adopting a case-by-case, adaptive evaluation method.
Cost Regulations 2025 – Key Takeaways
- Establishes a sector-agnostic, cost-based regulatory framework.
- Provides regulatory clarity without compromising on flexibility.
- Particularly relevant to digital markets, where pricing models and cost structures vary significantly.
Implications
- Likely to enhance scrutiny of pricing strategies of dominant firms, especially in:
- E-commerce
- Online services
- Telecom
- Ensures smaller players are not unfairly priced out of the market.
- Reinforces CCI’s proactive regulatory stance in a dynamic market environment.
