The Competition Commission of India recently released the draft of proposed regulations of Cost of Production. Section 4 of the Competition Act prohibits predatory pricing as an abusive conduct by a dominant enterprise. In this context, Explanation (b) to Section 4 defines "predatory price" as the sale of goods or provision of services at a price below the cost—as determined by regulations—with the intent to reduce competition or eliminate competitors. Since the enactment of the Act and the introduction of the Cost Regulations, 2009, competition law in India as well as globally, has undergone significant development. Accordingly, the Commission proposes to review the Cost Regulations 2009 wherein certain changes are being proposed to keep the regulations in sync with the evolution of competition law jurisprudence. The review of these regulations aims to align them with modern economic theories, judicial interpretations, and international competition law practices. 

For a pricing strategy to be classified as predatory, all three conditions must be met:
(i) Dominant market position (defined under the Act, under Section 4 explanation (a), with the ability to control prices and restrict competition).
(ii) Pricing below cost (as defined under the new draft regulations).
(iii) Intent to eliminate competition (creating a monopoly after eliminating competitors, rather than simply engaging in competitive pricing).

The most significant change in the new draft regulations is the removal of “market value,” which previously caused ambiguity, and the addition of “average total cost (ATC).” Average variable cost means total variable cost divided by total output during the referred period. In specific cases, the CCI may consider other cost assessment measures as outlined in the new regulations, such as average total cost, average avoidable cost, or long-run average incremental cost, depending on the industry, market conditions, and technology involved. The CCI or the director general may seek assistance from experts to determine cost figures. Enterprises disputing the cost determination can request an independent expert review at their own expense, ensuring a fair and transparent process.

Comments may be submitted by 19^th March, 2025.

Click the icon to access the draft regulations-