CURRENT AFFAIRS
CURRENT AFFAIRS
Description
The Competition Commission of India (CCI) has recently released a draft of the CCI (Determination of Cost of Production) Regulations, 2025, as part of a comprehensive effort to modernise its approach to assessing predatory pricing under the Competition Act, 2002. These proposed regulations aim to bring India’s competition laws in line with evolving global standards and contemporary economic theories. The updated framework is expected to provide a more precise and sector-neutral method for evaluating potentially anti-competitive pricing practices. The draft is currently open for stakeholder feedback, allowing industry experts and businesses to provide their inputs before the final version is implemented.
Understanding Predatory Pricing
Predatory pricing is a strategy where a dominant player in the market sets its product prices significantly below the cost of production with the intention of forcing competitors out of the market. Once these competitors have exited or weakened, the dominant firm can then increase its prices to recoup the losses, potentially harming both competition and consumers. This practice is considered an abuse of market dominance under Section 4(2)(a)(ii) of the Competition Act, 2002, and is subject to strict regulatory scrutiny.
Key Changes In 2025 Draft Regulations
The proposed 2025 regulations introduce several critical updates aimed at improving the accuracy and consistency of cost assessments:
Cost Calculation Shift - The draft regulations suggest moving from a market value approach to an average total cost (ATC) model for assessing predatory pricing. This change aims to capture the full scope of production expenses, including fixed and variable costs, rather than focusing solely on marginal expenses.
Focus on Average Variable Cost (AVC) - The new framework prioritises average variable cost as a more precise measure for determining predatory pricing. This approach is particularly relevant in fast-changing industries like digital services, where cost structures can vary significantly.
Sector-Neutral Framework - Unlike earlier approaches that were often tailored to specific industries, the 2025 draft regulations propose a sector-agnostic cost assessment model. This flexibility allows the framework to be effectively applied across a wide range of industries, from traditional manufacturing to emerging digital platforms.
Stakeholder Feedback And Industry Concerns
During initial consultations, industry representatives raised concerns about the clarity and consistency of cost assessment methods across different sectors. The CCI has responded by reinforcing its commitment to a cost-based approach that aligns with international best practices, ensuring that the framework remains transparent and adaptable to different market conditions.
Important Updates
The revision of these regulations is seen as a critical step in ensuring that India’s competition law remains effective in regulating anti-competitive practices. With the rapid growth of the digital economy, the need for a robust and flexible cost assessment framework has become increasingly important. This update is intended to provide regulators with better tools to tackle predatory pricing and deep discounting, which are common in sectors like e-commerce and digital services.
Global Alignment And Future Impact
By aligning with global competition standards, the CCI aims to strengthen its ability to address market distortions and protect consumer interests. This modernised approach also positions India as a more attractive destination for businesses seeking a fair and competitive marketplace, thereby supporting long-term economic growth.
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