Predatory pricing
Predatory pricing is an illicit strategy that involves deliberately setting prices at abnormally low levels to eliminate competitors. The seller sets a price so low that other sellers or suppliers cannot compete, forcing them to exit the market. This not only compels competitors to leave but also restricts new entrants from joining the market.
To qualify as engaging in predatory pricing, a business must not only hold a dominant position in the relevant market but must also demonstrate that its products or services are being offered below cost, utilizing sub-tactics with the explicit intent of eradicating competition.
Predatory pricing is defined under Section 4 of the Competition Act, 2002. An exception is provided wherein the pricing will not be considered violative of the law if adopted to meet competition.
In the case of Transparent Energy Systems (P) Ltd. v. TECPRO Systems Ltd., the Competition Commission of India (CCI) delineated four key factors for assessing a predatory pricing policy:
- Pricing below the cost price: The enterprise sets prices that fall below the actual cost.
- Intention to eliminate competition: The primary objective is to force competitors out of the market.
- Strategic recovery plan: The enterprise aims to recoup substantial losses once the market stabilizes.
- Elimination of existing competition: The pricing strategy is designed to drive out current competitors from the market
The Competition Commission of India (CCI) dismissed allegations of predatory pricing against the online marketplace ‘Shopee’ in the matter of In Re: Vaibhav Mishra v. Sppin India Pvt. Ltd. The CCI, in its ruling, acknowledged Shopee’s engagement in predatory pricing but concluded that it cannot be penalized under Section 4(2)(a)(ii) of the Indian Competition Act, 2002 due to the finding that Shopee does not hold dominance in the online market or platform economy.