white black legal international law journal ISSN: 2581-8503

Peer-Reviewed Journal | Indexed at Manupatra, HeinOnline, Google Scholar & ROAD



Authored By- Kinkini Chaudhuri


Predatory pricing is a strategy that entails a temporary price below the cost of production in order to injure competition and thereby reap higher profits in the long run. Predatory pricing is a strategy adopted to enhance market power. Predatory pricing has to be distinguished from a competitive pro-consumer pricing. There is a difference between pricing to meet and beat the competition; in predatory pricing the object is to hamper competition. The pricing scheme may be for elimination of a competitor or restriction of a potential entrant or reducing the cost of acquisition of a competitor.

Predatory pricing's initial goal is to control the market and establish its rules. When a business lowers its price to eliminate or punish a rival and reap the benefits of lower competition-related costs, this is known as predatory pricing. The predator has to make a lot of sacrifices up front, and even while there is a prospect of long-term recoupment, the results of this agreement are unpredictable. Practically speaking, this tactic entails a significant level of risk and is only practical for powerful players. Therefore, the majority of legal systems consider predatory pricing to be an abuse of power.

The purpose of this essay is to examine the applicability of dominance in allegations of predatory pricing. The discussion will be focused on Canadian, European Union, and American legal norms and practises.


Predatory pricing is a strategy that involves temporarily charging less than the cost of production in order to hurt the competition and, in turn, increase profits over time. To increase market power, predatory pricing is a tactic used. It is important to distinguish between predatory pricing and competitive, pro-consumer pricing. Pricing to keep up with and outperform the competition varies from predatory pricing, which has the goal of stifling competition. The price strategy may be used to prevent a competitor from entering the market, limit a possible competition, or lower the cost of acquiring a competitor.

Predatory pricing's initial goal is to control the market and establish its rules. When a business lowers its price to eliminate or punish a rival and reap the benefits of lower competition-related costs, this is known as predatory pricing. The predator has to make a lot of sacrifices up front, and even while there is a prospect of long-term recoupment, the results of this agreement are unpredictable. Practically speaking this method requires a large risk and is feasible for powerful players alone. Therefore, the majority of legal systems consider predatory pricing to be an abuse of power.[1]

Illustration: Consider- A, B and C are three leading telecom service providers. A lowers its prices to the point where B and C find it challenging to match it. As a result of A's pricing strategy acting as a barrier, D, a new player in the market, finds it challenging to enter the telecom sector. A, by decreasing the prices removes/forecloses all the competitors and achieves a monopolistic position. It later boosts prices to make up for the losses. Predatory pricing is an anticompetitive pricing strategy used by A. A has misused its dominating position in the market by lowering its pricing.[2]

Research Objective:

IMPORTANT FEATURES OF PREDATORY PRICING: Predatory pricing is a market specific technique that can be employed exclusively by part of the players. Therefore, the proper consideration of charges of predatory pricing involves examining the adequacy of the market's structure and the position of the alleged player within it. The factors that matter in cases of predatory pricing include Market saturation The size and number of market players are referred to as market concentration. One way to increase market power is by predatory pricing. Practically speaking, in competitive markets, obtaining market power through artificial means is a fantasy. Combination is the common way proposed to acquire supremacy in concentrated marketplaces, although in most of the instance it is unrealistic for the simple reason that competitors least agree to unite. Thus, predatory pricing albeit prohibited preferred than mergers, further discovering predatory pricing is a tough issue.[3]

Following are the points:

Barriers in entry: Entry barriers are another characteristic of concentrated markets. The threat of entry or the effect of frequent entries serves as a check against the adoption of predatory pricing in the absence of entry barriers. Markets with less concentration are competitive and incompatible with any form of anticompetitive behaviour.
Excess capacity: Entry barriers are another characteristic of concentrated markets. The threat of entry or the effect of frequent entries serves as a check against the adoption of predatory pricing in the absence of entry barriers. Markets with less concentration are competitive and incompatible with any form of anticompetitive behaviour.
Deep pocket: Only corporations with significant financial reserves can be effective in pursuing predatory pricing. "Financial reserves may in turn be possessed by enterprises with big market shares with relative efficiency and competitive costs or other advantages over their rivals or with activities in independent relative marketplaces. A company that works in multiple markets would have easier access to money from the profits of those other markets where it is successful”. Since the inception of the scheme of predatory, which means from the day the prices will be artificially low, the predator will incur losses over a substantial period of time. This means that, in order to survive, the predator must make sure that he incurs huge profits in order to survive against his foes, and so that the latter is unable to survive with the losses.

Recoupment: Predation pricing turns into a pointless activity in the absence of compensation for short-run losses. The definition and requirements for proving recoupment vary by jurisdiction. Recoupment in this sense encompasses the acquisition of reputation, market power, etc. in addition to the recovery of short-term financial losses. Most of the time, the presence of additional qualities allows us to infer or assume that instance recoupment will occur. Structural study is the essential technique for identifying the markets likely to be vulnerable to recoupment.[4]
From the above-mentioned features, it can be well understood that the above mentioned features can be maintained by a dominant entity. Market dominance has several facets, and if a non-dominant firm is in a stable financial position, it is quite conceivable for it to use predatory pricing. Let us understand by looking what laws are followed in the United States of America.[5]

POSITION IN THE UNITED STATES OF AMERICA: The Chicago school had a significant impact on American courts. This school's academics contest the idea that monopoly may be achieved by predatory pricing. They view predatory pricing as an absurd and unreasonable tactic. Predatory pricing is not portrayed as an impossibility. The likelihood of occurrence and the potential for discovery are their key concerns. The Supreme Court's decision in the Brooks case dictates the current situation in the US. In order to conclude to such a decision, the following must be able to furnish the following:

That the alleged predatory prices are below an accurate representation of the defendant's costs and that there is a very low likelihood that the defendant would be able to recover its investment in the below-cost price.
In the situation prior to this case, proving price discrimination with exclusionary purpose was enough to support a claim of predatory pricing.[6]
Recoupment is currently the most important factor, without which competition is unaffected even when other competitors suffer. Recoupment is therefore the key to preventing below-cost pricing, and a competitor's suffering is irrelevant.

Additionally, American courts have ruled again and time again that competition, not competitors, is the focus of antitrust legislation. Even though the courts recently acknowledged that using predatory pricing is a sensible tactic, they continue to uphold the Brook's ratio rule.[7]

POSITION IN THE EUROPEAN UNION (EU): Regarding our subject, European Union legislation has a very clear stance. Predatory pricing requires power since predatory practises are considered anticompetitive under the abuse of dominance provision of Article 82. Predatory pricing is recognised as a viable and successful technique in Europe.

Strategic theory, which is based on the ideas of asymmetric information or asymmetric access to financial resources, has a significant influence on European law. The idea describes how a dominant business might use its market dominance to keep out competitors and maintain its market dominance. A market leader has the ability to deceive and stunt the growth of a competitor due to the increased level of demand side information and independence from outside financing. According to this thesis, one must demonstrate the following in order to prove the existence of predatory pricing:

Enabling market organisation
A predation scheme with accompanying data,
A like recoupment
Cost-effective price and
Lack of a business defence or efficiency defence
In contrast to the United States, the European Union has a laxer definition of predatory pricing, and there are two possible outcomes that result in responsibility. First, any price that is below the average variable cost is prohibited by definition. Since this arrangement can have no other purpose except to stifle competition, predatory intent is assumed. Second, it is unlawful to charge a price that is higher than the average variable cost but lower than the average total cost if it can be shown that the goal of the pricing is to drive out a rival. However, dominance is a requirement in each of the aforementioned cases.[8]

POSITION IN CANADA: Predatory pricing is illegal in Canada under section 50 of the Competition Act 1985 and constitutes a civil abuse of dominance under sections 78 and 79. In Canada, there is no necessity for dominance in order to prosecute someone under Section 50 of the Act; however, in order to establish civil culpability, dominance of the entity must be proven.

According to the competition tribunal's ruling in the Nutrasweet case, the pricing scheme must include the two components listed below in cases where a civil lawsuit alleges abuse of dominance. First off, the price is less than the marginal cost. Second, there is a chance of recovery or the company is seeking to establish a reputation for predatory behaviour in one market by acting predatorily in another.

The Competition Bureau has also made it clear that recoupment is a necessary component of predatory pricing. Even while recoupment is thought to be a crucial component of predatory pricing, its existence is predicated on dominance. However, this is a rebuttable presumption that can be refuted by the presentation of contrary evidence.

Recoupment is accomplished by "charging prices above competitive levels or attaining another anti-competitive aim," according to the 2007 draught guidelines on predatory pricing enforcement. A few examples of anticompetitive tactics are maintaining a market structure's long-term stability, erecting hurdles to entrance by developing a "reputation for predation," enforcing participation in an illegal conspiracy, or creating an industry standard to exclude rivals or keep market control. As a result, Canada's perspective recoupment is highly diverse.[9]

POSITION IN INDIA: According to the Competition Act of 2002, "predatory price" refers to the sale of goods or the provision of services at a price that is less than the cost of producing the goods or the provision of the services, as may be determined by regulations, with the intention of reducing competition or eliminating the competitors. Predatory pricing claims under our law must be supported by dominance because the act defines predatory pricing as an abuse of dominance. Predatory pricing is considered a restrictive trade practise under Sections 2(o) and 33 of the Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act), which is now the law governing competition in India. According to the MRTP Act, dominance is not a need for

predatory pricing; rather, the predator's actions and intentions must be proven with convincing and convincing proof.[10]

Case: The Competition Commission of India which is a statutory authority under the Competition Act, 2002 held in the order of M/s. Transparent Energy Systems Pvt. Ltd. v. TECPRO Systems Ltd., that three conditions must be achieved to confirm that a dominant position has practised predatory pricing-

That the cost of producing the goods or providing the services, as determined by the firm, must be less than the average cost of doing so.
The goal of this type of product or service pricing manipulation was to establish a dominant player and eliminate all other competitors from the market.
The company must have planned to make up for the losses suffered as a result of the price reductions by raising the prices again after driving out the competition or prohibiting new entrants. ( https://rcic.in/uncategorized/predatory-pricing-and-its-legal-regime-in-india/ )


DISCUSSION WHETHER PREDATORY PRICING IS ILLEGAL OR NOT: Predatory pricing is a form of anti-competitive behaviour that harms market competitiveness. It leads to foreclosure of the competition which means that neither the incumbent companies can compete, nor the new entrants can transcend the obstacles and enter the market. Small businesses, MSMEs, and start-ups would suffer at the hands of the market leader if predatory pricing was permitted. Consumers will eventually suffer as well if the dominant player turns into a monopoly.[11]

According to Section 18 of the Competition Act, the Competition Commission of India is responsible for "eliminating practices that have a disincentive to competition, promoting and sustaining competition, safeguarding the interests of consumers, and ensuring freedom of trade practiced by other participants in markets in India." Therefore, it is the commission's duty to put an end to predatory pricing, which is considered an abuse of a dominating position through pricing.[12]

ESTABLISHMENT OF PREDATORY PRICING: Following are the points to establish the case of predatory pricing:[13]

Determining the relevant market: The circumstances of the relevant market must be considered for determining dominance and the claimed abuse. This is a challenging duty for the competition commission to take on because it entails not only applying the appropriate laws but also undertaking tests like the SNIP test (Small but Significant and Non-Transitory Increase in Price) and substitutability analysis, among other things.

According to Section 2(r) of the Competition Act, a relevant market is "the market that the Commission may determine with regard to the relevant product market, the relevant geographic market, or with reference to both markets.”

As a result, the act further divides the relevant market into the relevant product market and the relevant geographic market. The Competition Act's Section 2(s) defines the relevant geographic market as "a market consisting of the area in which the conditions of competition for the supply of goods or the provision of services or for the demand of goods or services are distinctly homogenous and can be distinguished from the conditions prevailing in the neighbouring areas," while Section 2(t) defines the relevant product market as "a market consisting of all those products or services which are regarded as being of the highest quality or value in the market.”

When determining the relevant geographic market, the Competition Commission takes the following into account:

Regulatory trade barriers
Specific local requirements
National procurement policies
Adequate distribution facilities
Freight charges

Preferences of consumers
The need for secure or regular supplies or rapid after sales services

When assessing the relevant product market, the Commission takes into account the following elements listed in Section 19(5):

Physical characteristics
Prices of goods and services
Preferences of consumers
Exclusion of in-house production
Existence of specialised producers
Classification of industrial products
The commission is unable to evaluate whether the corporation has abused its dominant position without first identifying the relevant market.

(B) Determining dominance: The Commission will then determine dominance after identifying the relevant market. The European Court of Justice's concept of dominance in the United Brands Case is mirrored in Explanation an of Section 4 of the Competition Act. "A position of strength, possessed by an entity, in the relevant market, in India, that enables it to— I operate independently of competitive forces prevailing in the relevant market; or (ii) affect its competitors, consumers, or the relevant market in its favour" is the definition of dominance.

When determining dominance, the commission takes into account all or any of the factors listed in Section 19(4), which include:

Market share of the enterprise
Size and resources of the enterprise
Size and importance of the competitors
Economic power of the enterprise including commercial advantage of the competitors
Vertical integration of the enterprises or sale or service network of such enterprise
Dependence of the consumers on the enterprise
Monopoly or dominant position whether acquired as a result of any statute or by virtue of being a government company or a public sector undertaking, or otherwise

Entry barriers, including the regulatory barriers, financial risk, high capital cost of entry, marketing entry barriers, economies of scale, high cost of substitute goods or services of consumers.

A threshold limit or arithmetic percentage has not been established in India because doing so would endanger the positions of the enterprises. It might result in pointless litigation or provide the corporations the opportunity to act quickly. As a result, the legislation affords the Competition Commission more latitude in establishing the level of dominance that the corporation has exercised.

(C) Establishing abuse: After identifying the relevant market and dominance, the commission determines the abuse of dominant position. Predatory pricing is one such abuse. For determining predatory pricing, the commission analyses the pricing techniques of firms with deep pockets who lower down their prices even below the average cost with an intention to recoup this loss later.[14]

Persons Who Can Initiate A Case Under Predatory Pricing:[15]

According to Section 19 of the Competition Act, CCI may look into claims of predatory pricing by:

If it thinks there is a case against the company, suo moto
Upon receiving a complaint from any person, consumer group, or trade association, along with any applicable charge prescribed by rules;
The Central Government, a State Government, or a legislative authority making reference to it
The following information must be sent with the information to the CCI:

the details of the complainant along with the details of the enterprise against whom the alleged complaint is made 
The material must be properly signed and include all relevant facts, documentation, and evidence, as well as the specifics of the violation.
The paper must be duly signed, contain all pertinent information, documents, and proof, as well as the circumstances of the infraction.

A receipt proving payment of the fees associated with providing the information must be included with it.
To learn more about the specifics of how to file information with the commission, please refer to the General Regulations, 2009 that the Competition Commission of India issued.

Procedure Followed By Competition Commission Of Infia In Order To Determine Predatory Pricing:

If the commission determines that a prima facie case has been established after receiving information under Section 19, it may instruct the Director General of Investigations. The Competition Commission must receive a report from the Director General in a certain amount of time. The report is forwarded by the Commission to the parties involved. If the report identifies a breach of a statute's requirements, it invites any parties with concerns to voice their concerns or suggestions. After taking into account the Director General's report and the comments/objections received, the Commission may issue pertinent orders or require additional research.[16]

Orders That The Commission May Pass In Case Predatory Pricing Is Made Out:

The Competition Commission has the power to pass any of the orders given under Section 27 of the act-

Ask the company in question to stop the aforementioned activity and refrain from using this pricing structure going forward.
Impose such penalties as it sees fit, not to exceed 10% of the average turnover for the three most recent financial years, on each of the individuals or businesses implicated in the abuse.
Direct amendment of any contract the firm has signed
Instruct the affected enterprises to abide by any additional orders the Commission may issue and to comply with the directions, including paying any associated charges;
Publish any order the commission deems appropriate.
As a pertinent decision under the act, the commission may also order the division of the dominant enterprise. Under Section 33 of the act, it also has the authority to issue temporary orders. The NCLAT hears appeals of the Commission's decision. The Competition Appellate Tribunal received the appeals earlier. The National Company Law Appellate Tribunal, however, has appellate authority over CCI as of 2017.[17]

Some Cases Regarding Predatory Pricing:

Case 1: MCX Stock Exchange v National Stock Exchange Of India Ltd.

This was the Competition Commission's first case involving predatory pricing. In this instance, the Commission on Competitiveness determined that predatory pricing constituted a type of unfair pricing. Unfair pricing is must be assessed on a case-by-case basis because it is not specifically specified anywhere. The National Stock Exchange does not have a legitimate motive to provide its services for free for such a prolonged period, according to CCI, and this behaviour goes beyond promotional or penetrative pricing. In addition, the commission noted that "it must be shown that there has been a specific incidence of under-pricing and that the scheme of predatory pricing makes economic sense before a breach of predatory pricing is recognised. The magnitude of the defendant's market share and the trend may be important in figuring out how easily he may use an alleged predatory pricing plan to drive out a rival, but they do not, on their own, allow for the assumption that this can happen. A claimant must pass a two-part test in order to satisfy the recoupment requirement of a predatory pricing claim: first, they must show that the plan could actually drive the competition out of the market; second, they must provide proof that the

remaining monopolist could raise prices to consumers for long enough to cover their costs without luring new competitors.[18]

Case 2: Bharti Airtel Ltd v Reliance Industries Ltd.

The Competition Commission of India made a distinction between penetrative and predatory pricing in this instance. It was noted that a company will use penetrative pricing as a short-term business strategy while entering a new market. This strategy is used to draw clients and establish a solid foothold in the market.

In this instance, Bharti Airtel accused Reliance Jio of using exploitative pricing practises with its Happy New Year offer. Due to JIO's short-term business strategy being used as a new entrant, the commission determined that no case was proven against the company. JIO did not then hold a dominant position in the relevant market, which in this case is the telecom industry.[19]

Case 3: Fast Track Call cab Pet. Ltd. & Ors. v ANI Technologies Pvt. Ltd. (OLA Case)

OLA is the target of a lawsuit for unfair pricing. Upon receiving the information, CCI requested that DG look into it. Investigation revealed that the company was offering discounts to draw clients that were more than the revenue the company was making. OLA wasn't a dominant participant in the relevant market with the necessary market share, according to CCI, so this wasn't an instance of abuse of a dominating position. Even though it employed the predatory pricing technique, it wasn't unlawful because there was no abuse of dominance.[20]


The aforementioned elements make it evident that several aspects are taken into account when determining whether a company is engaging in predatory pricing or not. Relevant market, business dominance, and exploitation of this dominating position are all discernible. Regarding the criterion of dominance in accusations of predatory pricing, there is a definite difference in approach between the three jurisdictions. Even if dominance isn't a legally recognised condition in the US, it's important for demonstrating the likelihood of recoupment. In the EU, dominance is a requirement, although recoupment as such need not be demonstrated. Both dominance and recoupment are prerequisites in Canada, but the latter is assumed if the former is present.[21]


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