The CCI on 17th February 2025 has released the Draft Competition Commission of India (Determination of Cost of Production) Regulations, 2025.
These regulations aim to refine cost assessment methodologies in predatory pricing cases, offering clearer guidelines to distinguish between fair competition and anti-competitive pricing strategies. The concept of Average Variable Cost (AVC) plays a crucial role in assessing predatory pricing practices. Predatory pricing occurs when a company sells its products below cost to eliminate competitors and gain market share. The CCI uses AVC as a benchmark to determine whether pricing is predatory.
Impact of the proposed Regulations – We feel that the proposed regulation may have following positive impact.
1. Increased Transparency in Cost Determination : Clearly defines different cost concepts, ensuring uniformity in applying cost calculations in competition cases.
2. Greater Flexibility for CCI : While Average Variable Cost (AVC) remains the default, CCI has discretion to apply different cost measures based on industry-specific needs.
3. Stronger Enforcement Against Predatory Pricing : By setting AVC as a proxy for marginal cost, the regulations reinforce the standard used to assess predatory pricing cases under Section 4 of the Competition Act.
4. Potential Burden on Enterprises : (a) Businesses may need to provide more detailed cost breakdowns; (b) Disputing a cost determination could involve additional expenses for expert consultations.
5. Legal Certainty and Continuity : The repeal of the 2009 regulations does not affect past cases, ensuring continuity in enforcement and legal proceedings.
6. Enhanced Expert Involvement : The provision for expert engagement can lead to more accurate cost assessments, strengthening CCI’s decisions.
7. Confidentiality Protections : Safeguards sensitive business data, fostering trust between enterprises and regulators.
The public consultation period is open until March 19, 2025.
Disclaimer: The information published in the above newsletter is collected from various sources in electronic medium and analyzed by the firm. The reader is advised to consult the attorney qualified in their jurisdiction, before acting on any information contained in this newsletter. India Juris excepts no liability what so ever in this regard.
