• Kakoli Nath

UNFAIR PRICING- A CRITICAL ANALYSIS OF LAWS DEALING WITH IT

Insight For Understanding Unfair Pricing-


Antitrust authorities around the world has actively investigated and penalized dominant companies for various types of anti-competitive behavior. However, historically, very few cases have been carried out on the issue of unfair pricing by the dominant entities. It is a popular perception that this apparently unanimous reluctance on the part of the competition authorities to initiate cases in this area of ​​antitrust laws could be attributed to the perceived difficulties in establishing when prices are really excessive or predatory.



Excessive price, as the term suggests, refers to the benchmark price of a product. It is necessary to determine said price, to determine whether the price in question is excessive and, therefore, unfair. In the Indian context, the collection of excessive/unfair prices by dominant entities is prohibited under the abuse of dominance by Section 4 of the Competition Act, 2002. The Competition Commission of India (CCI), in its jurisprudence of application, has recognized the practical difficulty in establishing the scope of excessive pricing[1]. In addition, in line with the previous global trend, accusations of excessive pricing have been rejected in the past for lack of substantial evidence on costs[2], the presence of compensatory factors such as the availability of substitutes for competitors and the legitimate reluctance of exceeding your jurisdiction by setting prices of goods/services. The predatory price is defined as a sale price that is below the cost price. In addition, section 4(2)(a)[3] of the Act uses the phrase 'including predatory pricing' after the expression unfair prices, therefore, it can be reasonably inferred that the opposite is true, that is, the price beyond the economic cost of goods/services should be considered as an excessive price and, therefore, an unfair price.



The real problem is deciding the competitive price in the absence of competition prevailing in the market in accordance with the Competition Act of 2002.

In contrast, although the Competition Act prohibits and condemns the 'unfair price' of the dominant entity, there is no explicit judicial precedent about the 'unfair price.' The Competition Commission of India is aware of the relevance and importance of an appropriate analytical framework for the determination of cases of unfair prices that are likely to be addressed in the future. In essence, this would help to avoid the risks associated with the problem and exorbitant costs for the consumers, the economy, and the industry. Predominantly, the challenge before the Commission is to maintain a balance between static and dynamic efficiencies to avoid undermining investment incentives while ensuring consumer interests.



An Overview Of Unfair Pricing In European Union Jurisdiction -


In the absence of any substantial provision under Indian law, the interpretation of foreign laws that are in consonance with Indian law must be taken into account. Article 102 of the Treaty on the Functioning of the European Union (TFEU) is drafted similar to section 4(2)(a) of the Competition Act, 2002. Article 102 of the Treaty on the Functioning of the European Union states that domain abuse may include "directly or indirectly imposing unfair purchase or sale prices or other unfair commercial conditions." In General Motors[4] case, the CJEU determined that there could be abuse if the price imposed is "excessive in relation to the economic value of the service provided." This was expanded in United Brands[5] case, where the CJEU related 'economic value' with production costs and competing products' prices. In this case, it would be an abuse to charge an excessive price because it does not have a reasonable relationship with the economic value of the product supplied. This excess could, among other things, be determined objectively if it were possible to calculate it by making a comparison between the sale price of the product in question and its cost of production, which would reveal the amount of the profit margin. Therefore, the questions to be determined are whether the difference between the costs actually incurred and the price actually charged is excessive and, if the answer to this question is yes, whether a price that is unfair in itself has been imposed or when compared to competing products.



The concepts of 'economic value' and 'unfair' have caused much confusion. In United Brands, the CJEU stated that alternative ways could be devised to determine what constitutes an economic value or an unfair price. Several national competition authorities and courts have tried to find ways to interpret these concepts. Perhaps the main lesson that can be drawn from these cases is that they have provided greater clarity about what excessive pricing is not than what it is.


Conclusion-


Unfair pricing is a complex form of anti-competitive behavior. The prevailing market conditions play a vital role in determining predatory prices, i.e., market entry conditions, abuse of dominance, monopolizing behavior, etc. Firms can also enter the non-predatory pricing strategy, that is, increase the cost of competitors or act collaboratively with competitors on the price reduction strategy.



The Competition Commission of India (CCI) has not considered unfair pricing to be abusive in all circumstances. It has been considered as a legitimate strategy for a new participant to capture market share and attract customers to a new product or service. However, the same practice becomes abusive when it continues indefinitely with the intention of driving out existing competitors and subsequently recouping losses incurred while predatory pricing is in progress.


SUBMITTED BY-

Nishant Tiwari

National University of Study and Research in Law, Ranchi

References-

[1] Kapoor Glass (India) (P) Ltd. v. Schott Glass (India) (P) Ltd., 2012 S.C.C. OnLine C.C.I. 16.

[2] HT Media Ltd. v. Super Cassettes Industries Ltd., 2014 S.C.C. OnLine C.C.I. 120.

[3] Section 4(2)(a), The Competition Act, 2002, No. 12, Acts of Parliament, 2003.

[4] Case 26/75, General Motors Continental N.V. v. Commission, [1975] E.C.R. 1367.

[5] Case 27/76, United Brands v. Commission, [1978] E.C.R. 207.

72 views

Subscribe to Our Newsletter

  • LinkedIn Social Icon
  • Instagram
  • Facebook Social Icon
  • YouTube