New CCI draft regulations aim to modernize predatory pricing framework in India, ET LegalWorld
Highlights
- The Competition Commission of India has introduced draft CCI (Determination of Cost of Production) Regulations, 2025, to modernize competition laws and update the methodology for determining production costs in predatory pricing cases.
- The proposed regulations replace the previous CCI (Determination of Cost of Production) Regulations, 2009, and shift the cost determination from market value to average total cost, aiming to align with contemporary economic theories and global competition standards.
The Competition Commission of India (CCI) has introduced draft CCI (Determination of Cost of Production) Regulations, 2025, to align with amendments under the Competition (Amendment) Act, 2023 to modernize the competition laws in the context of global best practices.
The proposed regulation seeks to update the methodology for determining production costs in predatory pricing cases, defining the cost benchmark for assessing and regulating predatory pricing under Section 4 of the Competition Act, 2002.
The predatory pricing is an economic principle that is an anti-competitive practice followed by a dominant firm setting up prices below the cost to eliminate the competitors, with raising the prices after attaining a stage where market forces do not dictate the price.
Section 4(2)(a)(ii) of the Competition Act 2002 explicitly prohibits this practice when it is used to establish market dominance unfairly.
The draft CCI (Determination of Cost of Production) Regulations, 2025 regulates predatory pricing through modernised cost benchmarks and is set to replace the CCI (Determination of Cost of Production) Regulations, 2009. These benchmarks are structured to align with contemporary economic theories, evolved legal jurisprudence, and global competition standards.
In a consultation paper floated by CCI, it said the cost would generally be taken as the average variable cost, serving as a proxy for marginal cost in predatory pricing assessments.
The draft regulations replace market value with average total cost. The determination of cost is proposed to be amended from the cost concept such as avoidable cost, long-run average incremental cost, market value to as average total cost, average avoidable cost, or long-run average incremental cost.
The objective is to align the cost regulation with the evolved market dynamics. “Under the Indian Competition Act, determination of predatory pricing is primarily assessed on average variable cost,” said Bharat Budholia, Partner at AZB & Partners.
The ongoing consultation process is set to shape the regulatory framework to address the anti-competition practices and balance fair competition.
