The CCI (Determination of Cost of Production) Regulations, 2025

Predatory pricing under Section 4(2)(a)(ii) is the sale of goods or provision of services at a price below cost, as determined by regulations, with a view to reducing competition or eliminating competitors. Everything therefore turns on which cost is used, and the regulations of 2009 had answered that question for fifteen years. The Competition Commission of India (Determination of Cost of Production) Regulations, 2025 were notified on 6 May 2025, after a draft published in February 2025 and a public consultation, and replace them. They make average variable cost the default benchmark, allow other measures where the industry requires them, and remove the concept of market value that had caused uncertainty.

1. Why the Regulations Were Revised

Three reasons were given. The jurisprudence had developed since 2009, in India and abroad, and the earlier regulations no longer reflected the way cost is analysed. The cost concepts they used were imprecisely defined, and market value in particular had no settled meaning in this context. And digital and platform businesses, in which variable cost is close to zero and almost any positive price clears it, had exposed the limits of a single benchmark. The Commission nevertheless declined to prescribe different benchmarks for different sectors, preferring a framework that is sector-agnostic and applied case by case.

2. The Benchmarks

1. Average variable cost is the default. The regulations provide that cost shall generally be taken as average variable cost, being total variable cost divided by total output over the relevant period, used as a proxy for marginal cost. Pricing below it is the strongest indication of predation, because no rational firm sells below the cost that varies with output unless it seeks something other than profit on the sale.
2. Average total cost. Introduced in place of market value. It comprises the whole cost of production, fixed and variable, and is relevant where pricing above variable cost but below total cost may still be exclusionary in the circumstances of the industry.
3. Average avoidable cost. The cost that would have been avoided had the firm not produced the additional output in question, which is often the fairest measure where predation is alleged in respect of a particular contract or a particular period.
4. Long run average incremental cost. Costs over an extended horizon, including capital investment, and defined more broadly than in the earlier regulations. It matters most in industries with large fixed and sunk costs, such as telecommunications and digital services, where average variable cost is very low.
5. Discretion in selection. The Commission may adopt a measure other than average variable cost according to the nature of the industry, the market and the technology employed, which is the flexibility the framework depends on.

3. What Was Removed

The definition of market value has been dropped. Under the 2009 framework it sat among the relevant cost concepts without a clear role, and it invited the argument that a price below the prevailing market level was evidence of predation, which confuses vigorous competition with exclusion. Its removal, and the introduction of average total cost in its place, is the most significant single change.

4. Related Topics and Provisions