Syllabus: 

GS2: Statutory, Regulatory and various Quasi-judicial Bodies.

Context: The Competition Commission of India (CCI) has notified new definitions to check predatory pricing and ensure fair competition. 

More on the News

• As per the CCI (Determination of Cost of Production) Regulations, 2025, the cost of a good or service will be considered its ‘average variable cost’, calculated by dividing the total variable cost by the total output over a specific period. 
• The total variable cost is derived by subtracting fixed costs and fixed overheads from the overall production cost of the good or service.
• The CCI chose to assess costs on a case-by-case basis, avoiding sector-specific definitions.
• The regulations   provide a sector-neutral, cost-based framework that is flexible and adaptable across industries, including the digital sector.
• This definition will be used to judge whether a price charged by a company for a product or service is predatory or not.

Predatory Pricing 

• According to the Competition Act 2002, predatory pricing is where a good or service is priced below its cost with the aim to reduce competition and eliminate competitors.
• Predatory pricing is an anti-competitive practice. Section 4(2)(a)(ii) of the Competition Act 2002 explicitly prohibits this practice when it is used to establish market dominance unfairly.
• For a pricing strategy to be classified as predatory, three key conditions must be met:
  Dominant market position: The firm engaging in predatory pricing must hold a significant market share, giving it the ability to control prices and restrict competition.
  Pricing below cost: The firm must sell goods or services below its cost of production. The CCI typically considers average variable cost (AVC) or marginal cost as the benchmark for assessing below-cost pricing.
  Intent to eliminate competition: There must be a clear intent to eliminate competitors and create a monopoly, rather than simply engaging in competitive pricing.

Competition Commission of India (CCI) 

• The CCI is a statutory and quasi-judicial body operating under the Ministry of Corporate Affairs.
• The CCI was constituted under the Competition Act of 2002. It serves as India’s principal competition regulator. It was officially formed on October 14, 2003, and operational since May 2009. 
• It consists of a Chairperson and not less than two and not more than six other Members to be appointed by the Central Government.
  CCI appointments require at least 15 years of professional experience in fields such as international trade, finance, or law, with a tenure of five years for members.
• It is the duty of the Commission to eliminate practices having adverse effects      on competition, promote and sustain competition, protect the interests of consumers and ensure freedom of trade in the markets of India.
• The Commission is required to give opinion on competition issues on a reference received from a statutory authority established under any law and to undertake competition advocacy, create public awareness and impart training on competition issues.