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PREDATORY PRICING: ASPECTS AND REGULATIONS
& Siddhanth Makkar**
ABSTRACT
The paper on its unfolding throws light upon the aspects and regulations of predatory pricing
and has considered the concepts of competition and monopoly. Predatory pricing is given birth
by unfair competition which results in appreciable adverse effect in the relevant market, which
drives the competitors to bend down to such practices through entering into anti-competitive
agreements or by abusing the dominant position acquired. The authors further discuss the
loopholes of the Monopolies and Restrictive Trade Practices Act, 1969 (repealed) and the
highlights of the Competition Act, 2002. Basic comparative study of different objects of the law
on competition and matters of different regions, namely, the United States of America, the
European Countries and India have been delved into for better understanding. At last, the
Competition Commission of India, the regulator of the land for competition in India, has been
examined with respect to its jurisdiction, functions and duties.
Keywords: Anti-Competitive Agreement, Competition, Monopoly, Predatory Pricing,
Relevant Market.
INTRODUCTION
- internal and external- helps those who are strong enough to benefit
from the new opportunities. However, it can hurt those who are ill-equipped to face the
challenges of competition. We must adopt concerted measures, both at the national and the
international level (sic), for an equitable management of increased global interdependence of
nations. At the national level, the State must be modernized to create an environment conducive
to creativity and growth and also to ensure that the fruits of growth are fairly and equitably
1
country to country and even within a country, it seems to change and evolve over time.
* Ditipriya Dutta Chowdhury, Student, School Of Law, KIIT University, Bhubaneswar, Odisha.
** Siddhanth Makkar, Student, School Of Law, KIIT University, Bhubaneswar, Odisha.
1
Vijay Kumar Singh, Competition Law and Policy in India: The Journey in a Decade,
http://nujslawreview.org/wp-content/uploads/2015/02/vijay-kumar-singh.pdf (last visited on Nov. 12, 2016).
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"Even within a particular national system, the goals of competition law may evolve and
transmogrify, often depending on the state of industrialisation of economy, the strength of the
political democracy, the power of judiciary and of bureaucrats, and the exposure of domestic
firms to global competition."2
OBJECTIVES OF COMPETITION LAW3
The US
Stated Objectives
Promotion
of
Competition
and
prevention
The EC
India
of
anticompetitive practices.
Protection and promotion of Consumer Interest.
Achieving Economic efficiency
Public welfare of employees, producers.
Competition Advocacy
Geographical and regional Integration.
Predatory price is defined as the sale of goods or provision of services, at a price which is below
the cost, as may be determined by regulations of production of the goods or provision of
services, with a view to reduce competition or eliminate the competitors.4 Prior to the
Competition Act, 2002, The Monopolies and Restrictive Trade Practices Act, 1969 (MRTP
Act) was the legal framework regulating competition in India under which predatory pricing
was a restrictive trade practice as per Section 2(o) and Section 33(j). Unlike Competition Act
2002, where dominance is a precondition for predatory pricing, under MRTP Act, it was not,
rather the conduct and intent of the predator is material and needs to be proved with clear and
cogent evidence. The primary characteristic of predatory pricing is price below cost. It is the
objective of the operators of predatory pricing to drive the contenders out of the market that
has a negative impact on market competition. Diversification of the activities of the enterprise,
in terms of products and its financial resources, gives birth to the ability to engage in
predatory behaviour.
2
Fox Eleanor M., Anti-Trust Law on a Global Scale: Race Up, Down and Sideways, Public Law and Legal Theory
Working Paper Series, Working Paper 3, New York University School of Law (1999).
3
Economic Laws Practice, Final Report on the Study on Anti-Dumping and Competition Law, 2008.
4
The Competition Act, 2002, § 4(b).
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Predatory pricing directs to the enterprise inhabiting monopoly5 status which sells its
commodities at price below cost regularly, thereby prohibiting competitors from fair
competition or ruling out potential competitors from entering the market. After having barred
competitors from fair competition and retreated potential competitors, the endeavour in
dominant position6 will increase the price above competitive price to make up short-term losses
by monopolized price.
ESSENTIAL FEATURES OF PREDATORY PRICING
Predatory pricing is a market particular procedure that can be received just by few of the market
players. Along these lines in predatory pricing claims, the genuine examination is to take a
gander at the reasonableness of market structure7 and position of the affirmed player in that
market.
The ingredients that are essential in predatory pricing cases are:
1. Market Concentration: Market concentration refers to the number and size of the players
in the market. It is one of the methods through which market power is elevated. For all intents
and purposes, in aggressive markets, accomplishing market control through simulated means
is a myth. Combination is the general means advocated to attain dominance in concentrated
markets, but in majority of the instance it is implausible for the simple reason that competitors
least agree to merge. Thus predatory pricing though illegal preferred than mergers, further
detecting predatory pricing is a complex issue.8
2. Entry Barriers: Concentrated markets are also portrayed by entry barriers. Without the
entry barriers, the risk of entry or the effect of numerous entries goes about as a check to the
adoption of predatory pricing. De-concentrated markets are Competitive and are not good for
any type of anticompetitive practice.
5
Natural monopoly means a situation in which scale economies is so great that having two or more competing
producers would not be viable and so efficiency dictates that a single firm serves the entire market.
6
Dominant position relates to a position of economic strength enjoyed by an undertaking which enables it to
prevent effective competition being maintained on the relevant market by affording it the power to behave to an
appreciable extent independently of its competitors, customers and ultimately of its consumers.
7
Market structure refers to the nature and degree of competition in the market for goods and services. The
structures of market both for goods market and service (factor) market are determined by the nature of competition
prevailing in a particular market.
8
Matsushita Electric Industrial Co. v Zenith Radio Corp., 457 U.S. 576 (1986).
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3. Excess Capacity: Absorption of opponent deals is the intended object of each predatory
pricing arrangement. With the diminishment of cost, the demand for the predator's item
increases with a fall in the demand for the products of the contenders. Without excess capacity,
the predator would not have the capacity to retain the intended rival's sales. Again if the there
is no extra production, it doesn't pressurize the opponents and their survival.
4. Deep Pocket: No more than corporations possessing sufficient financial reserves can be
successful in engaging predatory pricing. Financial reserves may in turn be possessed by firms
with large market shares with relative efficiencies and competitive costs or other advantages
over their rivals or with operations in independent relative markets. A firm with multi market
operations would have easier access to funds derived from profits of other markets in which it
successfully operates.9 Since in the primary scheme of a predatory phase, i.e., when selling at
artificially low costs, the predator will incur losses over a generous timeframe, it turns out to
ancial resources must be greater than the ones of his rival and
the latter will may not be as capable as the predator to withstand losses.
5. Recoupment: In the absence of recoupment of the short-run loses, predatory pricing
becomes a senseless operation. There is a difference between jurisdictions in the understanding
and proof of recoupment. Recoupment, in this sense, does not limit itself to the regaining of
monetary loses suffered in short term, it includes the acquisition of reputation, market power,
etc. In most instances, recoupment is inferred or presumed from the presence of other attributes.
Structural examination is the valuable tool for identifying the markets likely to be vulnerable
to recoupment.10
Therefore, on practical grounds, it is conceivable just for a dominant entity to have the said
properties. Market Dominance is a multifaceted angle and it is also entirely feasible for a nonpredominant element to adopt such predatory pricing provided it has sound monetary position.
Predatory Pricing is further dealt in this paper through the discussion of three case laws of The
United States of America, European Countries and India respectively.
9
Aditi Gopalakrishnan, Abuse of Dominance, Examining Issues in Predatory Pricing, Project done on behalf of
Competition Commission of India (unpublished manuscript).
10
Scott Hamphill, The Role Recoupment in Predatory Pricing Analysis, 53(6) Stanford Law Review 1583 (2001).
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THE STANDARD OIL CASE (THE UNITED STATES OF AMERICA)
An important aspect of discussion on predatory pricing necessarily delves into the reexamination of the above mentioned case dealing with disciplinary price cutting and
cartelization.
The Standard Oil case of 191111 is a landmark case in the development of anti-trust law12.
Standard oil was a company established in New Jersey. It set up an oil refining monopoly in
the United States of America (US) through the organized use of predatory price discrimination.
Standard oil quashed its contenders in one market at a time until it enjoyed a monopoly position
everywhere. It had acquired majority of stocks of a large number of companies in the oil
industry. This combination was charged with having obtained a complete mastery over the oil
industry controlling 90 per cent of the business of producing, shipping, refining and selling of
petroleum and its products and thus, they were in a position to fix cutting prices of crude and
refined petroleum selectively, wherever competitors entered. It gradually acquired a position
of monopoly. The key to its dominance and the devise for its maintenance was the process of
price discrimination.
The combination abused its control and the anti-competitive practices leveled against them
were:
1. Rebates, preferences and other discriminatory practices in favor of the combination by
railroad companies.
2. Restraint and monopolization by control of pipelines and unfair practices against competing
pipelines.
3. Contracts with competitors in restraint of trade.
4. Unfair methods of competition.
5. Espionage of the business of competitors, the operation of bogus independent companies,
and payment of rebates on oil, with the like intent.
11
Standard Oil Co. of New Jersey v. United States, 221 U.S. I (1911).
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6. The division of the US into districts, and limiting the operations of the various subsidiaries
corporations as to such districts so that competition in the sale of petroleum products between
such corporations had been entirely eliminated and destroyed.
The Supreme Court of the US found Standard Oil guilty of entering into contracts in restraint
of trade and monopolizing the petroleum industry through a long convoluted series of anticompetitive actions. Thus, this combination was in violation of Section 1 and Section 2 of the
Sherman Act.13
dissolution of the combination was appropriate.
In elucidating the necessity to adopt the rule of reason as a standard in determining the contract
whether a contract was in restraint of trade, the United States Supreme Court stated:
eration which the statute makes of the acts to which it refers, and
absence of any definition of restraint of trade as used in the statute, leaves room for but one
conclusion, which is, that it was expressly designed not to unduly limit the application of the
act by precise definition, but, while clearly fixing a standard, that is, by defining the ulterior
boundaries which could not be transgressed with impunity, to leave it to be determined by the
light of reason, guided by the principles of law and the duty to apply and enforce the public
policy embodied in the statute, in every given case whether any particular act or contract was
14
EUROPEAN COURTS REPORT (ECR)
AKZO Chemie BV v. Commission (1991)
The Commission
15
ECS was a small United Kingdom (UK) firm which produced benzoyl peroxide. AKZO, a
multinational chemicals company also produced benzoyl peroxide but concentrated on the
plastic sector. The Commission found that when ECS decided to expand its operations in the
plastic sector, thereby capturing one of AKZO's largest customers, AKZO retaliated by
threatening to attack ECS's business in the UK flour sector by reducing prices. It then supplied
benzoyl peroxide to the UK flour sector at low prices, offering large discounts to ECS's best
13
The Sherman Antitrust Act of 1890.
T RAMAPPA, COMPETITION LAW IN INDIA, POLICY, ISSUES AND DEVELOPMENT 99.
15
ECS/AKZO [1985] l OJ L374/1.
14
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customers. ECS complained to the commission that AKZO abused the dominant position
contrary to Article 102.16
Article 10217 restricts a dominant undertaking from eradicating a competitor and thereby,
spiraling its position by using scheme other than those which come within the scope of
competition on the basis of quality. Therefore, it is said that not all competition with respect to
price can be called as legitimate.
AKZO appealed in the Court. It argued that it could not be guilty of an abuse since it had not
reduced its prices below Average Variable Cost (AVC) and that under the Areeda-Turner test,
its prices were therefore not predatory.
Areeda-Turner Test
The firm knows the
precise, it should not pose serious difficulties in application. The firm knows its recent variable
costs and should become quickly aware of any substantial changes in such cost elements as
wages or materials. However, when a firm is attempting to determine its probable return on
new facilities over their useful life, it faces uncertainties of a much higher order. It cannot be
sure as to the long-term future course of wage, material and other variable costs. Nor can it be
certain of the prices it will be able to charge over the life of the new facility; accurate estimates
of future market-wide demand for its product are difficult, if not impossible, to make with
precision, and the firm has no control over, or perhaps even knowledge of construction or
expansion of capacity by others or the development of new substitutes for its product. Thus,
there is little basis for inferring predation from the fact that a monopolist has invested in new
facilities which later turn out to be unprofitable.18
Under Areeda-Turner test, a price below the reasonably anticipated short run marginal cost is
to be deemed as predatory whereas a price equal to or above the reasonably anticipated short
run marginal cost is not predatory.
16
ECS had originally obtained an interim injunction in the High Court in London to prevent AKZO from
implementing its threats, and those proceedings were terminated by agreement.
17
Article 102 of the Treaty on the Functioning of the European Union.
18
P. Areeda and D. Turner, Predatory Pricing and Related Practices under section 2 of The Sherman Act, 88
Harvard Law Review 697 (1975).
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Criticisms of Areeda-Turner Test
Short Run Marginal Cost (SRMC) is not the right level from which to measure predatory
pricing, as some above SRMC-level pricing may also be Predatory.
AVC is an unsatisfactory substitute for SMRC because AVC cost curve tends to be U-shaped
and gives the undertaking a lot of room for manoeuvre. Marginal cost rises and falls more
dramatically than AVC because AVC averages out the cost of one additional unit over the
entire output being produced. The assumption that SRMC and AVC are equivalent holds good
only in the long run.19
Classification as to fixed and variable categories is dependent upon the industry and time period
in issue. Longer the time period, the more costs that become variable. Areeda and Turner
recognised the problem and proposed20 that certain costs should always be considered fixed
(interest on debt, depreciation, taxes which do not vary with output).
Despite the perceived flaws in the test, it has been highly influential in anti-trust thinking and
some version of it is commonly used in US antitrust cases 21. It formed the basis for the
discussion in AKZO.
Judgement
The European Court of Justice accepted AKZO's arguments and held that:
1. There is no abuse if the dominant undertaking endeavors to obtain an optimum selling price
and a positive coverage margin. A price is optimum if the undertaking may reasonably expect
that the offer of another price on the absence of price would produce less favorable operating
profits in the short term. Furthermore, coverage margin is positive if the value of the order
exceeds the sum of variable costs.
19
S. BISHOP AND M WALKER, THE ECONOMICS OF EC COMPETITION LAW (3 rd ed., 2010).
P. AREEDA AND D TURNER, ANTITRUST LAW (1978).
21
In US v. AMR Corporation & American Airlines 335 F. 3 d 1109 (2003). The US Court of Appeals (10 Circuit
Court) rejected the argument that some test of incremental cost should be used in place of AVC it held that al, the
suggested ways of measuring incremental cost were flawed, and as American Airlines did not price below AVC
the govt. case against it was dismissed. Hovenkamp criticises this because the court refused to take into account
the opportunity costs incurred by the Airline (it has switched Aircraft form more profitable routes to those on
which it faced competition from smaller Airlines).
20
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2. Prices below AVC, that is to say, those which vary depending on the quantities produced by
means of which a dominant undertaking seeks to eliminate competitors must be regarded as
abuse.
3. Prices below average costs, that is to say, fixed costs plus variable costs, but above average
variable costs, must be considered abused if they are determined as a part of a plan for
eliminating a competitor.
SCENARIO IN INDIA
The prevailing scenario in India has been discussed through the following case:
M/s Fast Track Call Cab Private Ltd. (Informant) & M/s Ani Technologies Pvt. Ltd.
The Informant alleged that the Opposite Party commands about 69 per cent of the market share,
thus enjoying a dominant position in the relevant market. Unfair conditions and predatory
pricing had set up its monopoly and disposed of generally similarly effective contenders who
can't enjoy such predatory pricing in the radio taxi services market in the city of Bengaluru. It
was also contended that the Opposite Party, under the brand name Ola taxis, is putting forth
different unlikely rebates and rates to bait the clients and unviable incentives to its drivers,
thereby bringing about business failure for the Informant. It was likewise asserted that such
practice is bringing about removing the current players out of the market and is additionally
making entry barriers for the potential players.
Unleashing such assault of anti-competitive schemes in March 2014 amounted to a fall of
Informant's market share from Rs. 23 lakh in March, 2014 to Rs. 9.5 lakh in December, 2014
causing significant financial losses. Despite the prima facie order of the Commission, the
Opposite Party did not stop its practices of charging predatory prices.
The Commission was of the view that since the pricing is below average variable cost, there
market could not provide any justification as to such pricing behaviour in the relevant market.
There was an impending threat of the Informant and even other players in the relevant market
of completely getting quashed from the relevant market within a short period of time, and there
is an immediate requirement to stop the Opposite Party from practicing predatory pricing any
further. This even threatened the competition from being eliminated in the relevant market,
leading to monopolization.
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It was therefore ordered by the Commission that with immediate effect, the Opposite Party
shall organize its pricing system in the relevant market in such a way that the incentives paid
by the Opposite Party to the cab operators/drivers together with the share of the passenger
revenue passed on to the cab operators and other variable costs do not exceed the passenger
revenue collected by it. This order does not imply determination of the price at which the
Opposite Party may provide its services in the relevant market. 22
INDIA AND US LAW: SIMILARITY
There is a striking similarity between the Indian law and the US law. The basic two elements
of both for predatory pricing are:
1. The enterprise should possess dominant position in the relevant market.
2. Exercise of that dominant position which impedes competition.
An enterprise does not violate the competition law merely because it has sufficiently large share
of the market place such that it is a monopoly in economic terms. There is no violation if the
monopoly power grows or develops as a consequence of a superior product, business acumen
or historical accident.23 Thus, an enterprise cannot be penalized because it has developed
monopoly power via legitimate means.
In United States v. Aluminium Co. of America,24
natural monopoly may exist for products under patent or trademark, but this alone, does not
create an illegal monopoly. 25
Again in the case of United States v. Grinnell Corp.,26 the Supreme Court of the US stated that
the offence of monopoly under Section 2 of Sherman Act has two elements:
1. The position of monopoly power in the relevant market.
22
M/s Fast Track Call Cab Private Limited and M/s ANI Technologies Pvt. Ltd.
http://www.cci.gov.in/sites/default/files/062015_0.pdf (last visited on Dec. 7, 2016).
23
Smith v. Northern Mich. Hospital, 518 F.Supp.644.
24
148 F.2d 416 (2nd Cir. 1945).
25
Trixler Brokerage Co. v. Ralson Purina Co., 505 F.2d 1045 (9th Cir. 1974).
26
384 US 563.
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2. The willful acquisition or maintenance of that power as distinguished from growth or
development as a consequence of a superior product, business acumen or historic accident.
Thus, the United States courts are reluctant to condemn monopoly power per se. A monopolist
is immune from statutory liability if it owes its monopoly solely to a superior skill, superior
products, natural advantages (including accessibility to raw materials or market) economic or
technological efficiency (including scientific research), low margin of profits maintained
permanently and without discrimination, or licenses conferred by and used within, the limits
of law (including patents granted by a public authority).
A large firm does not violate Section 2 of the Sherman Act simply by reaping the competitive
rewards attributable to its efficient size, nor does an integrated business whenever one of its
departments benefits from the association with a division possessing a monopoly in its own
market. So long a firm is allowed to compete in several fields, it must seek the competitive
advantages of its broad based activity - more efficient production, greater ability to develop
complementary products, reduce transport cost and so forth. These are the gains that accrue to
an integrated firm, regardless of its market share, and they cannot by themselves be considered
uses of monopoly power.
The concept of abuse of dominant position of market power refers to anti-competitive business
practices in which a dominant enterprise may engage into maintain or increase its position in
the market. The very anti-competitive acts which a number of enterprises undertake under an
agreement, if taken by a single enterprise which holds the dominant position in the relevant
market, may suggest abuse of dominance. In this concept, there are two elements, namely, the
question of dominance and the ability to exert power to set prices independently and to abuse
that power. Market power represents the ability of an enterprise to raise and profitably maintain
process above level that would prevail under competition for a significant period of time. It is
also referred to monopoly power. The abuse of dominant position of market power leads to
reduced output and loss of economic welfare.27
ENFORCEMENT STRUCTURE: US-EU WITH RESPECT TO INDIA
Instead of the Indian system involving single enactment and single organization, the United
States implementation structure includes numerous offices and enactment. In the United States,
27
D.P. MITTAL. COMPETITION LAW & PRACTICE (3rd ed.).
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two government organizations bear the real duty of upholding, the Antitrust Division of the
United States
previous is a piece of the official branch of the government and the latter is an autonomous
authoritative organization, like the Competition Commission of India (CCI). The Sherman Act
is the most seasoned government antitrust statute, sanctioned in 1890 and predominantly deals
with anti-competitive agreements and monopoly exercised by enterprises. The Clayton Act,
1914 manages particular business works on including mergers, price discrimination and tying,
restrictive supply and so forth. The DoJ and FTC freely implement the Sherman Act and the
Clayton Act. In any case, if the infringement involves criminal arraignment, then the DoJ has
the select power to indict. The EU Competition law structure starts from the Treaty on the
however the substantial legitimate advancement has come in the range of competition law
secured by Articles 101 and 102. The Treaty is for the most part appropriate to agreements and
lead between the EU member States. However, law exchange hones appellate antitrust laws,
every constituent condition of the EU additionally has their separate national competition
offices and enactments. The Treaty did not determine the institutional structure for the
opposition law authorization and the same was surrounded by the European Council
ith the obligation to
guarantee consistency with the Treaty and authorizing, executing and building up the European
European requirement structure and the arrangement of the Act and in addition the forces and
elements of the CCI have been extensively designed on the appropriate arrangements of the
Treaty and the forces of EC. In spite of the fact that the Act has much in like manner with the
United States and EU requirement structure, yet the frameworks contrast fundamentally in the
matter of levels and nature of implementation.
COMPETITION COMMISSION OF INDIA
The functions and powers of the Commission is signified in the provisions of the Competition
Act, 2002. It is primarily responsible for taking cognizance of the matters affecting the interests
of the competitors and the economy or trade in India. Even when an anti-competitive agreement
has been entered into by any enterprise or there is abuse of the dominant position enjoyed by
the enterprise outside India, which in turn has an appreciable adverse effect in the Indian
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economy, Commission shall have power to inquire into the matter and pass order as it may
deem fit.28
Section 1829 lays down the duties of the Competition Commission of India. It says that the duty
of the Commission to eliminate practices having adverse effect on competition, promote and
sustain competition, protect the interests of consumers and ensure freedom of trade carried on
by other participants, in markets in India. The Commission may, for the purpose of discharging
its duties or performing its functions under the Competition Act, may enter into any
memorandum or arrangement with the prior approval of the Central Government or with any
agency of any foreign country.
The Commission has the power to inquire into certain agreements entered into by any
enterprise and the dominant position of enterprise.30
The Commission may inquire into any alleged contravention either on its own motion or on:
1. Receipt of any information, in such manner and accompanied by such fee as may be
determined by regulations, from any person, consumer or their association or trade
association; or
2. A reference made to it by the Central Government or a State Government or a statutory
authority.
The Commission determines whether an agreement has an appreciable adverse effect on
competition and for it certain factors have to be considered which have been mentioned in the
provisions of Section 19.31
On the reading of Section 19, a clear view of the factors determining status of the dominant
position could be drawn out.32
ant
33
.34
28
The Competition Act, 2002, § 32.
The Competition Act, 2002.
30
The Competition Act, 2002, § 19.
31
Supra note 28.
32
The Competition Act, 2002, § 19(4).
33
The Competition Act, 2002, § 19(6).
34
The Competition Act, 2002, § 19(7).
29
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Powers of the Commission to inquire into any combination is enumerated in Section 20.35
The Commission may, upon its own knowledge or information relating to acquisition referred
to in clause (a) of Section 536 or acquiring of control referred to in clause (b) of Section 5 37 or
merger or amalgamation referred to in clause (c) of that section, inquire into whether such a
combination has caused or is likely to cause an appreciable adverse effect on competition in
India. However, the inquiry shall be initiated within the limitation period of one year.
The condition that applies is that the Commission shall not initiate any inquiry under this SubSection after the expiry of one year from the date on which such combination has taken effect.
The Commission shall, on receipt of a notice under Sub-Section (2) of Section 6,38 inquire
whether a combination referred to in that notice or reference has caused or is likely to cause an
appreciable adverse effect on competition in India.
The Central Government for the purposes of inquiry shall on and after every 2 years revise the
value of asset & turnover based on:
1. Whole price index.
2. Fluctuation in exchange rate.
Section 20(4) gives the conditions for determining whether a combination would amount to
appreciable adverse effect or is likely to have an appreciable adverse effect on competition in
the relevant market or not.39
CONCLUSION
The monetary change of the nineties acquired fast change in India's business surroundings. The
MRTP Act was revised now and again to keep pace with changes. Notwithstanding such
revisions, it was felt that the MRTP structure was not sufficient to oblige the requests of a
changing monetary scene. There was a need to shift the focus from curbing monopolies to
35
The Competition Act, 2002.
Id.
37
Supra note 35.
38
Supra note 35.
39
The Competition Act, 2002, § 20(4).
36
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promoting competition. S. V. Raghavan Committee made proposals and presented its Report
and the Act was finally enacted in the year 2002.
interests of consumers and to ensure freedom of trade carried on by other participants in
markets. It also lays down provisions to control various forms of anti-competitive practices and
it also has an extra-territorial reach.
The Act's goal is to forestall practices having adverse effect on competition, to advance and
manage competition in the market, to secure the interests of the consumers and to guarantee
flexibility of exchange carried on by different members in business sectors. It likewise sets
down arrangements to control different types of anti-competitive practices and it additionally
has an extra-territorial reach, paving the way for control of predatory pricing.
Hence, it is said that the practice of predatory pricing should be discouraged. However, the
authors are of the opinion that the adoption of such model, at times, may be a boon for the
society. The authors believe that small newly incorporated enterprises, with a certain amount
of capital may be allowed to cut down the prices below cost, only for a limited period of time,
in order to sustain competition from the older or gigantic enterprises which are already present
in the market and has established themselves as recognised players in the relevant market. This
would give the players an opportunity to establish a perfect competition in the market. Once
these newly incorporated companies start making profit by using this scheme within the
permitted period of time, they too shall be prohibited from employing such methods anymore.
This would at least give these small players a chance to establish themselves in the relevant
market. In case they fail to make returns, within the permitted period of time, by implementing
this method of predatory pricing, and also if they can no longer sustain the losses, they would
anyway be flushed out of the market. The outlook that should be kept in mind is that all shall
be given an opportunity to have an original position (same starting line) and rest shall depend
upon the market forces.
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