The Competition Commission of India (CCI) has invited public comments on its draft regulations for determining the cost of production, aiming to modernize its framework for assessing predatory pricing. The proposed rules, released on Monday, will replace the existing guidelines set in 2009 and align them with contemporary economic and legal standards.
Regulatory Overhaul to Address Market Abuse
Under the proposed framework, Section 4(2)(a)(ii) of the Competition Act prohibits predatory pricing, defined as selling goods or services below cost with the intent to drive competitors out of the market. The CCI has outlined specific methodologies for cost calculation to ensure fair competition.
The draft CCI (Determination of Cost of Production) Regulations, 2025, issued under Section 64(2)(a) of the Competition Act, enable the regulator to establish cost benchmarks for assessing anti-competitive pricing practices. Traditionally, average variable cost will be used as a proxy for marginal cost in these assessments. However, in certain cases, the commission may consider other metrics such as average total cost, average avoidable cost, or long-run average incremental cost to determine if a dominant enterprise is engaging in predatory pricing.
Adapting to Evolving Market Dynamics
The move follows amendments to the Competition Act in 2023, which mandated revisions to align regulations with modern economic theories, judicial rulings, and global competition law practices. The CCI has emphasized that the updated regulations will bring greater transparency and predictability in cost determination for businesses.
To ensure an accurate assessment of costs, the commission and the Director General may seek assistance from industry experts. Enterprises disputing a cost determination will have the option to request an independent expert review at their own expense. Additionally, businesses can submit confidentiality requests for sensitive documents, which will be evaluated in accordance with the CCI (General) Regulations, 2025.
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Transition from Existing Rules & Industry Consultation
With the implementation of the new framework, the 2009 cost regulations will be repealed. However, any ongoing cases or regulatory actions initiated under the previous rules will remain valid.
CCI has set a March 19 deadline for stakeholders, industry participants, and legal experts to submit their feedback on the draft regulations. The final rules are expected to have significant implications for pricing strategies, competitive conduct, and regulatory compliance for businesses across various sectors.
