June 2025
1. Introduction
Section 4(2)(a)(ii) of the Competition Act, 2002 (“Act”) forbids the abuse of dominance by organizations, specifically through the predatory pricing of goods and services. On May 6, 2025, the Competition Commission of India (“CCI”) amended certain definitions of the cost benchmarks that are used in predatory pricing cases.[1] These amendments are called the Competition Commission of India (Determination of Cost of Production) Regulations, 2025 (“Amendments”), and they repeal the previous cost benchmark definitions (Cost Regulations, 2009). The CCI uses cost benchmarks to determine if a price is predatory. The Amendments’ goal is to better adapt pricing benchmarks to markets where prices change fast, specifically e-commerce and quick-commerce, and to align Indian competition law with global best practices.
This newsletter examines selective provisions and an analysis into the effectiveness of the Amendments through a comparison with the US and EU law.
2. Predatory Pricing Schemes
Generally, a predatory pricing scheme is where an organization eliminates other competitors by using heavily discounted goods or services to create a monopoly.[2] Usually, competitive pricing benefits the consumer who pays a lower cost. However, if no competitors exist, consumers are forced to buy products at any price from only one seller. The process of predatory pricing consists of two phases (a) the predation stage and (b) the recoupment stage. In the predation stage, an organization will intentionally charge low prices, below its profitability, to drive-out competitors who cannot afford to compete. Then, in the recoupment stage, with no other competitors on the market, the organization can recoup its losses by charging any price it likes. It can be very hard to distinguish between legal competitive low pricing and predatory pricing. Simply having a dominant position in the market is not enough by itself to trigger a predatory pricing concern.
2.1 Predatory Pricing in India
The Supreme Court and the CCI use a three-part test to determine if a price is predatory.[3] First, the organization must have a dominant position in the relevant market. The relevant market and determining dominance set the scope for the entire analysis, and these factors act as a preliminary step to merit any investigation by the CCI. The relevant market has two parts (a) the relevant geographic market and (b) the relevant product market. Under section 19(6) of the Act, the CCI will use certain factors to determine what the relevant geographic market is, such as regulatory trade barriers, distribution facilities, and characteristics of goods or nature of services among others. Similarly, section 19(7) functions the same for the relevant product market and includes factors such as physical characteristics or end-use of goods, price, consumer preferences, and other factors. A dominant organization is one whose own economic strength lets it act largely on its own terms, which is based on certain factors found in section 19(4) of the Act like market share, resources, and the importance of competitors among others. Being dominant alone is not enough, the organization must abuse its dominance for the CCI to investigate. Second, the pricing must be below the average variable cost (“AVC”)[4] as a benchmark. AVC is often used as a proxy for marginal cost, which is the total output cost of one unit, but this benchmark is difficult to accurately calculate, so AVC is used instead. Finally, the organization must have an intent to eliminate competition or at least restrict it, which is the evidence that the organization has abused its dominant position. Other cost benchmarks traditionally used are long-run average incremental cost (“LRAIC”),[5] market value, total cost, and avoidable cost.
2.2 Key Changes in Price Benchmarks
Previous benchmarks lumped together fixed and variable costs while using an industry-specific analysis for a product type, which made it harder to detect when prices became predatory. This led to inflexible pricing benchmarks and strict fixed-cost assessments. The Amendments’ biggest change was an abandonment of an industry-specific cost analysis, and a shift towards a case-by-case approach. This approach allows for specific data on an organization’s products leading to a more accurate calculation of price, especially in e-commerce and quick-commerce where prices change daily. Other major changes include:
- “Cost” is now explicitly defined as AVC as a proxy for marginal cost.
- Total Cost now includes depreciation and excludes financing overheads to ensure a more consistent determination of production costs.
- LRAIC now includes all variable and fixed costs, including sunk costs that are specific to a particular good or service.
- The CCI still has the final say on determination of cost, however appeals can be made using independent experts proposed by the parties to the proceedings. These experts must then be appointed by the CCI.
- Market value was rejected as a valid cost benchmark due to its reliance on external factors such as perceived value and willingness to pay, which are too volatile and hard to quantify.
These changes signify greater centralization and formalization of pricing benchmarks under competition law and are likely to impact organizations engaged in deep-discounting, sales, quick-commerce, and e-commerce. Organizations that consistently sell below their AVC may now face increased scrutiny from the CCI, as the widened cost definitions now incorporate depreciation under average total cost (“ATC”)[6] and sunk costs in LRAIC. This shift will require organizations to revise their accounting practices to include depreciation in production cost calculations and maintain detailed documentation to justify price cuts. Organizations that tend to abuse their dominance in a relevant market must avoid overly aggressive pricing strategies that suggest an intent to eliminate competition, as sustained low pricing without a clear cost-recovery path may be viewed as predatory. To mitigate legal risk, dominant organizations should ensure their pricing decisions are legally justified, transparently documented, and not designed to foreclose market rivals. However, with a greater use of experts in the appeals process, organizations will have a better opportunity to challenge illegitimate cost determinations made by the CCI.
3. Other Models & A Comparison
3.1 EU
Article 102 of the Treaty on the Functioning of the EU prohibits companies from abusing a dominant market position, including through predatory pricing. The EU’s Directorate General for Competition enforces this article.[7]
As far as the pricing element, the EU has adopted a very broad two-part test under AKZO.[8] In the EU, AVC includes variable costs only that change with the output of a product and fixed costs are excluded. Calculations use an organization specific (case-by-case) analysis, and if a price is below the AVC, then it is ruled automatically abusive and, therefore, predatory. If the price is below ATC but above AVC, then the pricing will be viewed as abusive if intent is shown to eliminate competitors. This two-tiered system lets regulators catch more cases because if prices fall in the gray area between AVC and ATC, the EU will still investigate, especially if there is evidence of the organization eliminating competition. Overall, the EU’s cost benchmarks act as a centralized, wide net to detect predatory pricing.
3.2 US
Predatory pricing is prohibited under Section 2 of the Sherman Act and is enforced by the Federal Trade Commission. The US Supreme Court’s Brooke case laid down a stringent test for determining predatory pricing, and successful prosecutions are difficult.[9] Brooke’s first prong asks if the specific defendant’s prices are below “an appropriate measure of the defendant’s costs.” The Supreme Court has not articulated what cost benchmarks should be used as an “appropriate measure,” but circuit courts tend to use AVC as a proxy for marginal cost.[10] If prices are above the AVC, then generally those prices are presumed lawful, while below may be considered predatory if additional intent to eliminate competition and create a monopoly is shown. The second element explicitly requires that the company recoups its losses from the first stage. This places a high bar for a showing of predatory pricing, especially when the first element also requires intent to create a monopoly. Further, prosecuting a claim is often inconsistent on which benchmarks and definitions of pricing are used. This makes an already difficult process of successful prosecution even more tenuous when determining cost.
3.3 Amendments Analysis with the EU & US
Like the EU, the Amendments’ goal is to better centralize pricing benchmarks and provide more flexibility to determine if predatory pricing has occurred. The Amendments expand the definition of pricing data to include depreciation, which is unlike both the EU and the US models. Including depreciation allows for greater flexibility to calculate costs in rapidly changing markets.
One danger is that by casting a wider net on prohibited conduct, innocent organizations engaging in legal competitive pricing may be over-included and wrongfully prosecuted. This concern is mitigated, but not eliminated, by the change to allow independent pricing experts in the appeals process. Greater access to experts will help ensure that cost calculation is more accurate and innocent organizations are not wrongfully prosecuted. A downside is that appeals will probably be lengthier, which have harmed slower systems like the US. Systems with wider nets like the EU seem to be better able to capture accurate predatory pricing, however, further jurisprudence is required to see the exact effect that the Amendments will have on the detection of predatory pricing.
Another benefit of the Amendments is that they move away from an industry-specific analysis to a case-by-case approach, which decreases the chances for inaccurate pricing data by the CCI. Combined with the formalization of AVC as the primary benchmark, pricing benchmarks will likely be better at detecting when organizations are abusing their dominant positions using predatory prices. These changes, along with an explicit rejection of market value as a benchmark, show that the CCI is focused on targeting organizations that desire to act quickly and eliminate competition using their greater resources. These changes are likely effective at equipping the CCI with the tools necessary to protect competition and consumers and are better aligned with international practices.
4. Conclusion
The Amendments are a substantial step towards better pricing benchmarks when determining if predatory pricing has occurred. With a wider net to catch predatory organizations, these Amendments are both a great benefit to consumers and organizations with heavy competition. Future jurisprudence will clarify the effects of the Amendments, but at a minimum, they are an effective move towards dealing with abusive pricing in today’s modern markets. Organizations in India should educate themselves on the application of these Amendments, and any future changes, while also considering US and EU doctrines as potential indicators of future changes.
This Newsletter is written by Isaac Clement, a law student from University of
Georgia School of Law, United States (under the guidance of Priti Suri, Founder & Managing Partner), an intern at PSA
[1] See Gazette notification CCI, No. 02 of 2025 found at https://www.cci.gov.in/images/whatsnew/en/gazzette1746632546.pdf (last accessed on 12 June, 2025)
[2] SeeMohsin, Dr. Kamshad, Predatory Pricing in India (March 10, 2020) found at: https://ssrn.com/abstract=3552135
[3] See Uber India Systems Pvt. Ltd v. Competition Commission of India & Ors., 12 S.C.R. 107 (2019)
[4] AVC is the total variable cost, i.e., those costs that change depending on production, divided by the total output of the product
[5] This is the average cost of producing extra output over a long period of time
[6] ATC includes variable and fixed costs, divided by the quantity produced
[7] See EU Commission, Communication from the Commission – Guidance on the Commission Enforcement Priorities in Applying Article 82 of the EC Treaty to abusive exclusionary conduct by dominant undertakings (24.2.2009), located here https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52009XC0224(01) (last accessed June 12, 2025)
[8] See AKZO Chemie BV v. Commission (1991) ECR I-3359; Tetra Pak International SA v. Commission (1996) ECR I-5951
[9] See Brooke Grp. v. Brown & Williamson Tobacco Corp., 113 S. Ct. 2578 (1993)
[10] Compare Tri State Rubbish v. Waste Management, 998 F.2d 1073, 1080 (1st Cir. 1993) (explaining that the 1st Circuit uses variable cost as its benchmark), with Superior Prod. P’Ship v. Gordon Auto Body Parts Co., 784 F.3d 311, 319 (6th Cir. 2015) (explaining that the 6th Circuit uses AVC)