Context

India’s national competition regulator, the Competition Commission of India (CCI), has introduced the Draft Competition Commission of India (Determination of Cost of Production) Regulations, 2025. This initiative is part of a broader effort to modernize India’s competition laws under the Competition (Amendment) Act, 2023, ensuring alignment with global best practices.

Purpose of the Proposed Regulations:

The draft regulations aim to update the methodology for determining production costs in predatory pricing cases, replacing the existing CCI (Determination of Cost of Production) Regulations, 2009. The consultation period for stakeholders is open from February 17 to March 19, 2025, allowing feedback submissions via CCI’s online portal.

Understanding Predatory Pricing

Predatory pricing is an anti-competitive practice where a dominant firm sets prices below cost to eliminate competitors, intending to raise prices once competition is weakened or eliminated. Section 4(2)(a)(ii) of the Competition Act, 2002 prohibits such practices when they lead to unfair market dominance.

Under the Competition Act, 2002, three conditions must be met for a pricing strategy to be classified as predatory:

1.   Dominant Market Position – The firm must hold significant market power.

2.   Pricing Below Cost – Prices must be deliberately set below the cost of production.

3.   Intent to Eliminate Competitors – The firm must aim to drive competitors out of the market.

The 2025 draft regulations propose modernized cost benchmarks, incorporating contemporary economic theories and global competition standards to regulate predatory pricing more effectively. The CCI has the authority to impose penalties, corrective measures, and pricing regulations in specific sectors to prevent market distortions.

Challenges in Regulating Predatory Pricing

Since 2009, India’s market dynamics have evolved significantly, particularly with the rise of digital markets and platform-based economies. This transformation makes it challenging to differentiate between predatory pricing and legitimate competitive pricing strategies.

The updated cost assessment methodologies aim to provide greater clarity in identifying anti-competitive pricing strategies. Experts believe these reforms will enhance regulatory oversight, ensuring dominant firms do not misuse their market power. The new guidelines are also expected to reduce uncertainty in pricing strategies, benefiting businesses, especially in price-sensitive sectors.

Conclusion

The new draft regulations are designed to provide better tools for identifying and preventing predatory pricing, fostering a more competitive and transparent market in India. The ongoing consultation process will play a crucial role in shaping these regulations, ensuring a balance between fair competition, consumer protection, and business innovation. Once finalized, these updated regulations will offer clearer guidelines for businesses, regulatory bodies, and consumers alike, reinforcing India's commitment to a fair and competitive market.