Competition Commission issues norms to assess predatory pricing practices

The Competition Commission of India (CCI) has notified a fresh set of regulations to assess the cost of production, forming the basis to evaluate allegations of 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 revised framework clarifies key cost concepts used in determining whether a firm is engaging in predatory pricing, the practice of setting prices below cost to eliminate competition.

Rather than prescribing sector-specific metrics, the new framework allows for case-by-case assessment.

According to the notification, “cost” in the explanation to Section 4 of the Competition Act, which deals with abuse of dominant position, will generally refer to average variable cost as a proxy for marginal cost. However, the Commission may, in specific cases, consider alternative cost concepts such as average total cost, average avoidable cost, or long-run average incremental cost (LRAIC), depending on the market, industry, and technology involved.

The new rules also allow the Commission and its investigative arm, the Director General, to engage suitable experts in determining cost figures.

The parties involved in proceedings can request expert evaluation of cost, provided such requests are supported with reasons and costs are borne by the requesting party.

"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.

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 2025 regulations repeal the earlier Determination of Cost of Production norms framed in 2009, but actions taken under the previous rules will continue to be valid under the new framework.