In common parlance, Predatory pricing may be defined as pricing below an
appropriate measure of cost for the purpose of eliminating competitors in the
short run and reducing competition in the long run. It is a practice that harms
both competitors and competition. Normally price cutting is aimed simply at
increasing market share, predatory pricing has as its aim the elimination of
competition and creating monopoly.
· Concept and determining Predatory Pricing
The concept of predatory pricing is difficult to define in precise economic
terms. In simple terms it is sacrificing of present revenues for the purpose of
driving competitors from the market with the intent of recouping lost revenues
through monopoly profits thereafter.
Determining Predatory pricing
In order to prevail as a matter of law, a plaintiff must at least show that
either (1) a competitor is charging a price below his average variable cost in
the competitive market or (2) the competitor is charging a price below its
short-run, profit-maximizing price and barriers to entry are great enough to
enable the discriminator to reap the benefits of predation before new entry is
It was further clarified that, the standard of profit maximization price should
be applied only when the barriers to entry are extremely high i.e. if the
barriers for an entry in a specified are lower the firm set the price closer to
the marginal cost. For instance, Entry barriers for setting food outlet are very
low, hence the prices charged for edible food at these food outlet is nearly
close to the marginal cost.
Case No. 1
· Fast Track Call Cab Pvt. Ltd. and Ors. (Informant). vs. ANI Technologies
Pvt. Ltd. (Respondent) dated July 19,2017
Facts of the case
The aforesaid case adjudged by Competition Commission of India (“Commission”)
dated July 19, 2017. The Informant alleged that the Respondent has abused the
dominant position and offered the relevant market by offering heavy discounts to
the passengers and incentives to the cab drivers associated with them which
amounts to predatory pricing. The Commission directed the Director General
(“DG”) to conduct detailed investigation into the matter.
Observation and Findings
The issue before the DG under this case were:- (i) whether, Respondent held a
dominant position in the relevant market or not; and (ii) if it held a dominant
position, whether its conduct would amount to abusive practice (predatory
pricing) within the meaning of Section 4(2)(a)(ii) of the Indian Competition
The DG has opined that for a player to have a dominant position in the relevant
market, it should be able to hold its market share for a reasonable period of
time whereas the market share of the Respondent declined due to entry of another
participant i.e. Uber.
The DG noted that in the absence of dominance of an entity, the question of
abuse would not arise. However, the DG analyzed the pricing strategy of
Respondent vis-à-vis its competitors and rather found Uber to be a more
aggressive player, in terms of below-cost pricing, in the relevant market than
the Respondent. Thus, DG opined that both Respondent and Uber have adopted
'below-cost pricing strategy'. However, since the scheme of the Act only
attracts the provisions of Section 4 when an incumbent is found to be dominant,
the DG stated that OP can be said to have indulged in abuse by way of predatory
pricing, only if it is found to be dominant in the relevant market. Since OP was
not found to be dominant, the DG concluded that Respondent did not contravene
the provisions of Section 4 of the Act.
The Informant contended placing reliance on General Court’s decision in Astra
Zeneca v. Commission (Case T-321/05) and British Airways plc v. Commission (Case
T-219/99) case, wherein it was noted that decline in the market share cannot be
taken as an evidence that the entity is not dominant. The Informant further
contented that dominant position cannot be judged based on the fact that
enterprises ability to increase price but also on the ability of the enterprise
to suppress it for a longer period of time which adversely affects the
competition. In the alternative, the Informants have stated that it is not
necessary that only one entity can be dominant in a particular relevant market.
There is a possibility of two entities exercising dominance at the same time.
· A new entrant armed with new idea, superior technology or a superior product
or technological solution that challenges the status quo in a market and shifts
a large consumer base in its favour would cannot always be as held dominant.
· If we analyze the provision of the Act i.e. Section 4 it is restricted to the
dominant position held by only one enterprise or one group. In the present case
presence of more than one dominant entity (i.e. OLA and UBER) none of those
entities would be able to act independent of one another.
Case No. 2
· Deutsche Post AG (Case COMP/35.141) Commission Decision of March 20, 2001
Facts of the case
Deutsche Post AG (“DPAG”) activity was delivery of letter post. DPAG has a
statutory exclusive right to the "speciifed area", that is to say the conveyance
of letters. The revenue generated by DPAG is substantial and amounted to
significantly to its total turnover.
United Parcel Service (“UPS”) alleged that DPAG was using revenue from its
profitable letter-post monopoly to finance a strategy of below-cost selling in
parcel services, which are open to competition. Without the cross-subsidies from
the specified area, DPAG would not have been able to finance below-cost selling
there for any length of time. UPS therefore called for a prohibition of sales
below cost and the structural separation of the reserved area and the parcel
services open to competition.
Observation and Findings
The Commission observed the DPAG revenue for the specified period and observed
that the cost charged by DPAG was below the incremental costs of providing this
specific service. This would mean that every sale of parcel services business
represented a loss which comprises all the capacity-maintenance costs and at
least part of the additional costs of providing the service.
Every sale not only would entail the loss of at least part of additional costs,
but made no contribution towards covering the carrier's capacity-maintenance
costs i.e. variable cost. In the medium term, such a pricing policy is not in
the DPAG's own economic interest. DPAG could increase its overall result by
either raising prices to cover the additional costs of providing the service.
Additionally it was observed that DPAG adopted a strategy of fidelity rebates
which had the same effect as the exclusive purchase obligations. The strategy in
relation to fidelity rebates deterred mail-order traders from setting up
alternative delivery structures as that might conflict with their duty of
fidelity and thus jeopardise the special price. This prevented the development
of potential competition from alternative infrastructures.
· An interesting concept in relation to Cross Subsidization is highlighted
herein. In common parlance cross subsidization would occur when revenue from a
specific service does not match with the cost involved in providing such
specific service and the service for which revenue exceeds stand-alone cost is
the source of the cross subsidy for the specific service in which revenue does
not cover the costs. This concept was also discussed is an order issued by CCI
in June 2011 2 wherein it was opined that :-
“Cross subsidisation itself has no connection to leveraging by dominance in one
relevant market, as it is basically a fiscal or ﬁnancial transfer from any
· Loyalty Rebates may lead to benefit for consumers. Such loyalty rebates would
be anti competitive only if they prevent large share of the relevant market such
that they exclude rivals or act as a substantial restrictions to entry and/or
Predatory Pricing is a complex form of an anti-competitive conduct. The
prevailing market conditions play a vital role in determining predatory pricing
i.e. entry conditions in the market, abuse of dominance, monopolization conduct
etc.. Predatory pricing shall not be only strategy adopted by firms to gain
market dominance. Firms may also enter into strategy of non price predatory
pricing i.e. raising the cost of competitors or acting in collaboration with
competitors in price cutting strategy.
1 - International Air Industries, Inc. v. American Excelsior Co. 517 F.2d 714,
724 (5th Cir. 1975)
2 - MCX Stock Exchange Ltd. Vs National Stock Exchange of India Ltd. & Dot Ex