INTRODUCTION
Competition is defined by various court precedents as a procedure that needs many competitors and fragmentations.[1] It is the centre or a situation in the fair market where all the businesses compete with each other for making their customer base and to grab the market’ sometimes also for accomplishing some targeted business goals. And market or economy of any country performs only because of fair competition, competition is important for innovation and for fostering development in any nation it creates a feeling of winning the consumers among the companies for their respective products, and for that the companies always try to lessen the price or to bring something new to the market, this keeps market-fresh. But the practice of adopting unfair means by the companies having dominance in the market like predatory pricing, which provides low prices compared to other vendors or below their cost of production, for any product to the consumers for ensuring the creating barriers to the other competitors and then after a period again spikes the prices for overcoming the losses, this termed as predatory pricing. “Predatory pricing is a kind of unfair price and as the unfair price has not been defined anywhere, the unfairness must be determined based on the facts of the case, and this unfairness is restricting the growth of the fair competition in the market about the customer or the competitors”.[2]
PREDATORY PRICING HAS A NOTABLE DISADVANTAGE IN THE FAIR MARKET COMPETITION
The two judges bench in Michelin vs EU Commission held that being in a dominating position does not constitute an offence; rather, it simply indicates that the enterprise in question has a specific need to refrain from acting in a way that undermines real, and unfair competition in the common market”.[3] the CCI’s decision in Poonam Gupta v. Unitech Limited[4] held that the Competition Act did not criminalize or prohibit dominant position per se, but rather its misuse and abuse, similarly, the Apex court during the Uber Order[14][5] held if any practice which is made for long time profit, at a loss and in this case the loss was made for the trips, Explanation (a)(ii) then this would constitute in as much as this would affect the plaintiff’s competitors in the market in his favour”.
Predatory pricing constitutes unfair competition as it is a subtype of unfair prices, which is a notable disadvantage for fair competition in the market also it restricts the entry of newcomers in the market, as it is unfair prices, but since unfair prices haven’t been defined anywhere, it is indeed up to the circumstances of the case to determine to see if they’re unfair, Evaluating the unfairness concerning the consumer or the opponent.[6] The pricing of service below the costs which is incurred by an enterprise to procure that service can be termed predatory if the price is below average variable costs.[7]
PERILS OF PREDATORY PRICING
Despite having many benefits of predatory pricing one has to understand one thing predatory pricing is part of unfair trade practice it can eliminate competitors and can drag consumers toward the company it can also result in market dominance and can create barriers for the other competitors all this might accomplishing companies target for tenure but all this can be done only for the short term because in long term no one can be benefited by this neither the consumers nor the company itself, because after a Spain of time company has to recover the loss. Predatory pricing is a misuse of one’s dominant position in the market, section 4 of the competition act of 2002[8] defined the same. The statute nowhere explicitly defined that if someone is in a dominant position then it must be penalized, but misuse or abuse of that position is punishable under the act and such abuse includes the following action: –
- The first and foremost condition is to be in a dominant position in the market and then misuse such position by imposing unfair conditions upon the vendors as well as the
- Restricting to access the market
- By using unfair trade practices like predatory pricing which creates barriers for newcomers to enter the market.
Competition Commission in the M/s Fast Track Call, Cab Private Limited v. ANI Technologies[9]
defined dominant position, in this case, the petitioner who was running radio taxi services
claimed that Ola which is a cab service provider took undue advantage of being in a dominant position by providing unfair discounts and offers for grab customers in the market which results in predatory pricing in section 4(2)(a)(ii) of the Indian competition act, 2002, the court held that for being in the dominant position in the market the company has to hold onto greater than 30% market shares and should have it for a good amount of time and then after discussing it court held that Ola cabs were not in a dominant position in the market so the question of abuse of dominance should not be there and if once an entity is not in a dominant position so it cannot abuse the same, and as the predatory pricing is contemplated to anti-competitive practices and providing discounts and general offers for promoting the same cannot count as the predatory pricing.
Then the question before us is which action constitutes predatory pricing in MCX Stock Exchange Ltd. v. National Stock Exchange of India Ltd., the court held that Predatory pricing is a subset of unfair price, according to the CCI, and as the unfair price hasn’t been defined elsewhere, the unfairness must be assessed based on the specific facts of the case, Examining the injustice about the client or the rival necessary. The National Stock Exchange of India (NSE) cannot continue to provide its services free of cost for such a long period, according to the CCI, and the practice made by the company, which is zero pricing in this case goes much further than marketing or penetration price.[10]
CONCLUSION
There must be genuine market competition for such an entrepreneurial spirit to grow in any country. This constituted a competitive business climate where all the companies, whether domestic or international, compete against one another and this is exclusively based on the quality of their products and services, on the other hand, the markets without fair competition, could be characterized as a system where business get preferential and biased treatment and protected from the rivalry. So, it means that Price levels can never be “too low.” It can actually, but not very frequently, is the quick response. Because in general, consumer gains from cheap pricing. Only when below-cost pricing enables a dominating company to create barriers or to eliminate its rivals from the market and subsequently raise prices to above-market levels for an extended period can consumers suffer harm. Competitive marketplaces always inspire entrepreneurship and lead to long-term economic growth in the nations that have them. However, countries that restrict fair market competition typically have fewer entrepreneurs, and the people are left with no alternative options in the market which sometimes also leads to monopoly in the market, which tends to slower economic growth, hence unfair practices like predatory pricing should not be there, it not creates a barrier to the other players in the market but also restrains the growth of the nation and its economy.
Author(s) Name: Nikita Tomar (Institute of Law Nirma University)
References:
[1] United States v Philadelphia Natil Bank [1962]374 US 321 (369)
[2] MCX Stock Exchange Ltd. v. National Stock Exchange of India Ltd.2011 SCC Online CCI 52
[3] Nederlandsche Banden Industrie Michelin NV v Commission of the European Communities (322/81) EU:C: 1983:313, Commercial Solvents v. Commission, [1974] ECR 223
[4] Poonam Gupta v. Unitech Limited, 2012 SCC Online CCI 32, Prints India v. Springer India Private Limited, 2012 SCC Online CCI 44
[5] Uber (India) Systems (P) Ltd. v. CCI, (2019) 8 SCC 697
[6] MCX Stock Exchange Ltd. v. National Stock Exchange of India Ltd.2011 SCC Online CCI
[7] Case C-62/86, AKZO Chemie BV v. Commission of European Communities, See also: Case T-83/91, Tetra Pak II v. Commission of European Communities
[8] Competition Act, 2002, s. 4
[9] M/s Fast Track Call Cab Private Limited v. ANI Technologies 2015 SCC Online CCI 70: [2015] CCI 88
[10] MCX Stock Exchange Ltd. v. National Stock Exchange of India Ltd.2011 SCC online CCI 52
