Competition Commission issues norms to assess predatory pricing practices

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Competition Commission of India (CCI) has notified the regulations for determining the cost of production, a move that will help the watchdog to more effectively assess alleged predatory pricing and deep discounting practices especially in the quick commerce and e-commerce segments.

As part of efforts to update the framework for assessing predatory pricing, the watchdog came out with the draft rules in February.

After stakeholders' consultations, the Competition Commission of India (Determination of Cost of Production) Regulations, 2025 have been notified.

The development also assumes significance against the backdrop of CCI looking at some complaints of unfair business practices made against quick commerce as well as e-commerce players.

Competition law prohibits predatory pricing as an abusive conduct by a dominant enterprise.

CCI now has a strong regulatory framework to deal with alleged predatory pricing and deep discounting activities in the market place. It will also help in assessing the complaints against some quick commerce and e commerce entities.

Rather than prescribing sector-specific metrics, the new framework allows for case-by-case assessment. This will enable the watchdog to consider the unique features and evolving dynamics of digital markets when evaluating alleged predatory conduct, the regulator said in a background note about the regulations.

"Some stakeholders expressed concern that the draft regulations lack clarity on how the Commission will assess costs in different sectors viz. digital markets. In response, the Commission notes that the Cost Regulations 2025 establish a sector-agnostic, cost-based framework that is flexible and adaptable to various industries, including the digital economy," it said.

A few stakeholders advocated for retaining market value as an alternative cost benchmark, especially in markets where pricing may diverge from internal costs due to cross subsidisation, high fixed costs, and advertising-based models.

In response, CCI said while market value may help contextualise pricing dynamics, it does not constitute a cost benchmark, as it reflects external factors like consumer willingness to pay and perceived value.

"The draft regulations maintain a cost-based assessment framework grounded in measurable production costs, consistent with international best practices and jurisprudence," as per the background note.

CCI decided to review the cost regulations 2009 wherein certain changes were proposed to keep the regulations in sync with the evolution of competition law jurisprudence.

"The review of these regulations is aimed to align them with modern economic theories, judicial interpretations, and international competition law practices," it noted.