Rising Allegations of Predatory Pricingby E-Commerce Giants: Grey Areas underIndian Competition Law

Context

Recent allegations surfaced against e-commerce giants Blinkit and Zepto of predatory pricing and anti-competitive practices that disadvantage local retailers, which are a pressing concern for the market. India’s largest retail distributor group, the All India Consumer Products Distributor Federation (AICPDF), which represents 400,000 distributors for major companies, requested CCI to look into the matter.[i] Following the complaints against these companies, the Department for Promotion of Industry and Internal Trade (DPIIT) has asked the Competition Commission of India (CCI) to investigate the matter urgently.

The issue is not new, as in the past big companies like Flipkart, Amazon, Ola, and Uber had faced allegations of predatory pricing, and CCI had also taken proceedings against the claims made by local retailers. With 881 million internet users, India’s e-commerce market, currently worth $71 billion, is expected to reach $325 billion by 2030.[ii]According to Invest India, “E-commerce accounts for about 7% of India’s retail market.”Hence, the issue demands deeper investigations by the concerned authorities to ensure fair competition and a level playing field for all. The main concern should be the impact on the livelihood of local retailers.

To understand the issue properly, let’s delve deeper into the concept:

What is ‘predatory pricing’?
Why do companies adopt this method?
What are the laws in India regarding it?
What are the potential loopholes?
How does it impact the local retailers?

Analysis

Predatory pricing, or below-cost pricing, is the setting of a selling price unreasonably low, even lower than the cost of production, for a temporary period to thwart competition and make excessive profit in the long run. It is highly risky and uncertain; hence, it is practiced by large undertakings only. The main motive is to control and capture the market by driving out competitors who cannot match such deep discounts on prices and are forced to leave the market.

Second, the goal is to disincentivize the potential new entrants in the market, and the third is to establish a monopoly. Their strategy is not pro-consumer but a mere tactic to earn larger profits. As it is just for a temporary period, once they achieve their intended goals, they drastically increase prices to recoup their losses. Recoupment focuses greater attention on establishing market dominance and reputation instead of recouping monetary losses.

Does The Consumer Get The Benefit Of Predatory Pricing?

In the short term, customers benefit from reduced prices, which result in increased consumption. But when companies’ intended goals are fulfilled, they increase their prices. In that situation, customers are not left with any good substitutes, and they end up buying the products even at higher prices. Hence, in the long run, consumers lose out because they have fewer choices, face higher prices, and often get lower-quality products, as companies no longer bother about quality or innovation to match their rivals due to reduced competition.

Is This Practice Legal Or Illegal In India?

In many countries, including India, the practice is illegal as it is against fair competition.Predatory pricing is outlawed by Section 4 of the Competition Act of 2002[iii] as an abuse of dominance.According to Section 4(2)(a) of the Act, companies that in any way impose discriminatory or unjust conditions on the purchase or sale of goods or services, or that use unjust or disproportionate pricing in the purchase or sale of goods or services, are involved in an abuse of a dominant position.[iv]However, it’s tough to establish that predatory pricing has occurred, as companies always defend it by saying it’s just their business plan and strategy to compete with their rivals.

InMCX Stock Exchange Ltd. v. National Stock Exchange of India Ltd[v],predatory pricing was first argued in India,in which the commission laid down two prong tests the claimant should meet to achieve the claim of predatory pricing: first of all, evidence that the strategy could, in fact, force the rival out of the marketplace; second, that the remaining monopolist then hike prices for customers as long as to recover his lost expenses without drawing freshrivals.

In Transparent Energy Systems (P) Ltd. v. TECHPRO Systems Ltd.[vi], the CCI outlined four guidelines to identify predatory pricing practices:

Businesses set prices that are lower than their expenses.
Eradicating the competition from the sector is the main goal.
The company intends to recoup the losses following the fulfilment of their intended goals.
Companies successful in eradicating current competitors.

However, the main issue lies in the interpretation of Section 4 of the Act, which states that a corporation can only be accused of predatory pricing if it enjoys the benefit of a “dominant position” in the “relevant market.”[vii]Section 19(4) of the Act sets out the criteria that the CCI needs to take into account when determining an entity’s dominant position. In Fast Track Call Cab Private Ltd. v. ANI Technologies Pvt. Ltd.,[viii]“CCI determined that an entity must hold a market share for a reasonable amount of time in order to be deemed as “dominant entity”, and unless it is proved that the entity is dominant, it’s not possible to hold them liable for the practice. But is this narrow interpretation adequate in today’s context where there exists toe-to-toe competition? The law needs amendment considering today’s market scenario; not only market share but also the strategies, investments, future plans, and potential of the entity need to be considered during the proceedings. The CCI should take these factors into account instead of outwardly dismissing the allegations.

Way Forward

E-commerce has fundamentally transformed the market structure and consumer behaviour.It revolutionized the way people do shopping, making it harder day by day for local retailers to compete. People who used to come into the market for shopping now switched to online platforms for almost everything, be it groceries, medicines, or clothes. Adding to it, such aggressive pricing strategies make it nearly impossible for local retailers to survive in the market. It’s a serious concern that needs consideration. Annual sales of Indian quick commerce platforms are projected to exceed $600 billion this year. Blinkit holds a 44% share, followed by Swiggy and Zepto, each controlling about 30 and 23% respectively.[ix]

Discounts per se are not wrong, but in the competitive world, we need to think about other players also who are engaged for their means of livelihood.Very often arguments come forward from new entities as they give discounts to compete with already established big players, and it’s totally justified also, but it should not be for an indefinite period and without any scrutiny,and how much discount to be given also needs to be considered to ensure fair competition and a level playing field for all. Large entities can recover their losses and might not be as impacted as local retailers, who make small investments.CCI should adopt a balanced approach that safeguards healthy competition and protects local retailers without putting any player at an unfair disadvantage.

Determination of Cost of Production Regulations, 2025[x]

The Competition commission of India has recentlyannounced the new regulations to assess below- cost pricing in more uniform and transparent manner as it is one of the essential ingredients of predatory pricing under Section 4 of the Competition Act, 2002.[xi] With the surge of allegations against platforms like Amazon, Uber, Swiggy, the need for consistent framework became inevitable to detect and prevent predatory abuse in digital markets. The new regulations were necessary to remove the ambiguities regarding what actually constitutes below-cost pricingto make the determinationuniform and consistentas it was never clearly defined under law.The new regulations proposed to consider ATC (Average Total Costs) over other costs while evaluating below-cost pricing in any allegation of predatory pricing as ATC comprises both fixed and variable costs therefore, itgives the holistic picture of pricing strategy of companies. Despite, the regulations clear the ambiguity regarding costs the problem doesn’t ends here as still significant challenges remain regarding the anti-competitive intent, assessing dominance in digital markets as without being a dominant entity company can’t be held liable for predatory pricing. Thus, while the reforms are timely, it may still not fully resolve the grey areas surrounding predatory pricing laws.

Establish Clear definition and thresholds:There is need to establish clear criteria and definitions of what constitutes predatory pricing to remove the current ambiguityin order to penalize predatory practicesmore effectively.

Different factors to determine the dominance of an entity:Market share is being used to determine dominance of the entity but other factors also need to be considered with the market share to keep proper check on any predatory practices of company especially in digital markets.
Transparent pricing mechanisms: CCI should bring stringent regulations regarding pricing strategies by mandating e-commerce platforms to disclose their pricing structures, including discounts in order to investigate any predatory practice more effectively.
Fixing Price Floors for Certain Products:Minimum pricing floors on essential products is essential as it could prevent e-commerce giants from selling certain products below cost to drive out local competitors.
Regulating excess discounts: The CCI should bring measures to regulate high discounting given by companies by introducing caps on how much discounts are to be given in order to protect micro and small retailers while ensuring fair competition and consumer welfare.

End Notes

[i]https://www.livemint.com/companies/blinkit-zepto-quick-commerce-cci-scrutiny-retailers-complaint-dpiit-amazon-flipkart-anticompetition-11726836465554.html

[ii]Ibid.

[iii]https://cci.gov.in/images/legalframeworkact/en/the-competition-act-20021652103427.pdf

[iv]THE COMPETITION ACT, 2002 (12 OF 2003) CONTENTS Sections Page CHAPTER I PRELIMINARY 1.

[v]Mcx Stock Exchange Ltd. & Ors vs National Stock Exchange Of India Ltd. & … on 23 June, 2011

[vi]M/S Transparent Energy Systems Pvt. Ltd vs Tecpro Systems Ltd on 11 June, 2013

[vii]https://www.investindia.gov.in/team-india-blogs/fdi-policy-amendment-tackle-predatory-pricing-e-commerce

[viii](6 Of 2015) Fast Track Call Cab Pvt. Ltd vs Ani Technologies Pvt. Ltd. (74 Of 2015) … on 19 July, 2017

[ix]https://www.indiratrade.com/blog/blinkit-dominates-indias-quick-commerce-race-in-fy25-with-44-market-share-indira-securities/9459

[x]https://taxguru.in/corporate-law/competition-commission-india-determination-cost-production-regulations-2025.html#google_vignette

[xi]https://cci.gov.in/images/legalframeworkact/en/the-competition-act-20021652103427.pdf