The Competition Commission of India (CCI) has spelt out its approach to studying pricing patterns by floating a draft to this effect recently. The Competition Commission of India (Determination of Cost of Production) Regulations, 2025, lays out methodologies for determining the cost of production, which may enable the CCI to delve deeper into allegations of predatory pricing, excessive pricing, and deep discounting.
As a recent report in this newspaper says, the context here is the transformative impact of quick commerce and e-commerce, upending both producer and consumer behaviour. It would, however, be premature to jump to the conclusion that CCI wants to empower itself to monitor pricing in markets. This is because Section 4 of the Competition Act, 2002, already bestows it with the powers to do so. Besides, the regulations to determine cost have been in existence since 2009, and in fact, the latest draft is remarkably similar to these rules. The CCI has refrained from price-related interventions since its inception, and been a light touch regulator. If it has chosen to revisit the drawing board on pricing and cost, it is possibly on account of the disruptive emergence of digital retail. It is, however, to be hoped that CCI’s efforts to adjust its perspectives to contemporary realities in this space (just as it had done in the case of Big Tech) remains just that — and does not lead to a shift from years of well-regarded restraint to blunt price controls.
The draft regulations will consider using average variable cost as a proxy for marginal cost to evaluate potential predatory pricing scenarios. CCI can apply alternative cost measures — such as average total cost, average avoidable cost, or long-run average incremental cost — based on specific industry characteristics. The regulations will allow enterprises under investigation to challenge cost determinations by commissioning expert evaluations at their own expense. Innovative pricing in e-commerce and quick commerce has increased affordability and convenience for consumers. Competitive pricing among a multiplicity of players should not be confused with predatory pricing. CCI could step in if there are signs of price gouging after a possible market shake-out.
A shake-out per se should not be its concern, as its consequences cannot be anticipated. There is no reason at present to believe that the Indian retail landscape will lose any of its heterogeneity (big and small players; online and brick and mortar). So, there can be no case for the CCI to intervene proactively. There can be no denying the underlying raison d’ etre for these new regulations. The modus operandi of quick commerce and e-commerce needs to be understood and evaluated in real time. The dynamic interplay of these forces and their effects on a level playing field needs to be understood, so that any later action in the event of a market distortion is a well informed one. The CCI should be effective and sparing in its actions.
