Predatory Pricing in India: The Uncatchable Prey?

As the aim of Competition Law is to promote economic efficiency by increasing competition between firms, it is crucial to identify abusive practices like predatory pricing and employ strict actions. Predatory pricing i:e the sale of goods at a price below costs to reduce competition in the market, adversely drives out competitors and attains monopolist position for a dominant firm. However, the slender line of difference between valid competitive prices and predatory prices makes the approach of Competition authorities towards predation skeptical. The objective of this paper is to critically evaluate the practice of predatory pricing in India with a comparative approach. The main predicament in identifying predation is the difficulty of differentiating predatory pricing from competitive price reduction. However significant the popular Average Variable Cost Test is, the drawback of using cost based tests alone is that all the firms facing losses could possibly be charged of predation. Therefore, Recoupment and Consumer Betterment tests need more attention. More importantly, appropriate implementation of a three-tier enforcement system including assessment of the market structure, AVC Test and various non-cost tests, and introduction of specialised provisions in the relevant statute can make identification of predatory pricing accurate.