Brief Context
In News The Competition Commission of India (CCI) has notified the “Determination of Cost of Production Regulations, 2025”, replacing its 2009 framework. Background: Predatory Pricing and Competition Law Predatory pricing is defined under the Competition Act, 2002 as the sale of goods or provision of services, at a price below the cost of production with a view to reduce competition or eliminate competitors. Such practices are deemed abuse of dominant position under Section 4 of the Act.
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Syllabus :GS 3/Economy
In News
- The Competition Commission of India (CCI) has notified the “Determination of Cost of Production Regulations, 2025”, replacing its 2009 framework.
About
- This regulatory shift aims to empower the watchdog to better scrutinize predatory pricing and deep discounting, especially in the e-commerce and quick commerce sectors.
Background: Predatory Pricing and Competition Law
- Predatory pricing is defined under the Competition Act, 2002 as “the sale of goods or provision of services, at a price below the cost of production with a view to reduce competition or eliminate competitors.”
- Such practices are deemed abuse of dominant position under Section 4 of the Act.
- The earlier Cost Regulations (2009) were increasingly seen as outdated amid the rise of digital markets, which involve complex pricing structures, cross-subsidies, and non-monetary value exchanges.
Key Features of the 2025 Regulations
- Flexible, Sector-Agnostic Framework: Moves away from a one-size-fits-all model.
- Allows case-by-case assessment, adapting to sector-specific dynamics, including platform-based digital businesses.
- Focus on Measurable Production Costs: Reaffirms that internal production costs form the benchmark, not market value (which can be influenced by consumer perceptions, brand value, or subsidies).
- Rejects stakeholder proposals to use market value due to its subjectivity and external dependencies.
- Modernization & Global Alignment: Aligns with international competition law standards and best practices. Incorporates insights from modern economic theories and judicial interpretations relevant to platform economies and dynamic pricing.
Significance
- Legal Clarity: Provides a defined cost-benchmark framework grounded in economic rationale.
- Digital Economy Readiness: Accounts for cross-subsidisation, high fixed costs, and non-traditional revenue models prevalent in digital platforms.
- Consumer and MSME Protection: Prevents dominant firms from using price wars to wipe out smaller players.
- Ease of Regulation: Enhances CCI’s ability to investigate, quantify, and adjudicate anti-competitive pricing with consistency.
Source :TH