In the modern world, the technology driven population adopts to more user friendly and easily approachable media to avail the required products and services. Shopping has expanded its domain over the electronic media attracting many customers by lucrative discounts and door-step hassle delivery. The increasing online market also impacts the offline market which faces the challenges of their products or services being high priced and expenses of storing or maintaining the same. This affects the healthy market competition amongst the business entities of varied operational scope.
With the view to regulate the economic development of the country, the Government has brought forth the Competition Act, 2002, (hereinafter referred to as “Act”) to promote and sustain competition in markets, to protect the interests of consumers and to ensure freedom of trade carried on by other participants in markets, in India, and for matters connected therewith or incidental thereto. The Act also establishes a regulatory authority – Competition Commission of India (hereinafter referred to as “CCI”) to ensure prevention of practices having adverse effect on the market competition.
In order to survive the competition offered by rival competitors, corporates often end up strategizing the pricing of their products or services at a level making them a preferable choice. Concerns may arise where competitive pricing turns into predatory price hampering the fair competition.
Predatory pricing, as per the provisions of Section 4 of the Act, is one of the forms of abuse of dominant position by an entity whereby the sale of goods or provision of services, is at a price which is below the cost, as may be determined by regulations of production of the goods or provision of services, with a view to reduce competition or eliminate the competitors. Dominant position of an enterprise is established if it operates independently of competitive forces prevailing in the relevant market or affect its competitors or consumers or the relevant market in its favour.
Thus, in order to invoke an action against predatory pricing it is essential to establish that the rule flouting entity acquires dominant position in the market and has abused the same to its advantage. However, incentivising the customers with new offers and schemes does not amount to be anti-competitive unless coupled with abuse of dominant position.
Predatory pricing is punishable under the provisions of Section 27 of the Act whereby the CCI may direct discontinuation/ modification or payment of penalty.