Aparna. R 

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INTRODUCTION:

It always takes only one smart business strategy to win monopoly in the market. Whether such business strategy and agreement are violating the market competition or not is the key factor in deciding the fate of other businesses in the market. It is always right to think that the businesses to gain profit will always come up with a loophole to achieve it. The predatory pricing is nothing but an act of a company setting its price of its products so low that the other players in the market find it difficult to sustain their business and eventually they have to exist the market. One significant factor that can influence the business in pricing their product can be the market conditions such as elasticity of demand, the brand value of the product etc. 

How well the consumers respond to the change in price can affect the product pricing in the market. When the companies act in a predatory manner by selling at an extremely low price to drive the competitors out of the market, it is called predatory pricing strategy. The consequences of having a predatory pricing strategy can be vast. It does not only create a threat among the player in that particular market but also it creates a threat in the relevant or substitute product market. The Competition law outlaws the predatory pricing strategies making it violative under Section 4 [i]. This article specifically focuses on predatory pricing with reference to E-commerce market in India.

SIGNIFICANCE OF E-COMMERCE MARKET: 

E-commerce sector has become the flag bearer when it comes to technological developments in the 21^st century. On one side of the coin the E- commerce houses have created a lot of jobs and ease of doing business and contributed considerably to the growth of economy, on  the other side of the coin it has also taken down the tradition of retail shopping to an extent and created deep discount culture making it difficult for the brick and shop owners to sell at such a low price. Every house hold has in fact started buying millions of products right from the place they are. This has resulted in entry of number of players into E-commerce business. Hence this calls for a regulation of the market competition in the E-commerce sector. Since 2002 the competition law policy has been going through a lot of amendments according to the trends of the market and it has been ever growing.  

PREDATORY PRICING IN INDIA & CCI  

One of the significant pre-requisites to determine the prima facie case in the predatory pricing case is that the company should be in a dominant position. E-commerce market started to develop in the mid-2000s. Therefore, the Competition commission of India (hereinafter referred as CCI) has observed that the E-commerce market doesn’t not enjoy a dominant position in the market for the case to fall under the ambit of predatory pricing. The E-commerce market having the new way of delivering products to the consumers have attracted quite a number of consumer base even though the CCI has held that it doesn’t enjoy a dominant position over the brick and motor shops. 

While addressing the concept of predatory pricing in E-commerce market, the case of Mr. Ashish Ahuja v. Snapdeal.com [2] becomes significant to discuss. In this case, the commission while considering the relevant geographic market, included both the Offline and online market to analyse whether the company San disk was enjoying a monopolistic position. In my opinions, this judgement slightly flawed because the whole issue in this case is that a party was selling products at a competitive price in a “web portal”. This being the fact, in order to determine the competition, only the online portals should have been considered as a relevant geographic market because most of the consumers tend to compare prices of a product in different web portals like Amazon, Flipkart, Snapdeal etc. Even in the case of “Mohit Manglani v. Flipkart India Pvt. Ltd. and Ors [3]” the commission observed that “Irrespective of whether we consider e-portal market as a separate relevant product market or as a sub-segment of the market for distribution, none of the OPs seems to be individually dominant”. The determining the relevant geographic market should not only depend upon the substitute products that are available but it should also require an analysis of the issue at hand in a case. In case where the issues are purely between two online entities then the aspect brick and motor stores should not be included in the relevant geographic market because it overthrows the “fair competition” concept. 

Even though there are considerable number of consumers who prefer offline shopping, the technological advancements have made shopping much simpler and cheaper. So given this fact, the consumers will choose online shopping over the offline one when it offers attractive discounts. Therefore, the argument that online platforms are not in a dominant position is an illogical argument or rather an argument which need proper statistical backing. The predatory pricing according the commission’s ruling can only be formulated by a company in dominant position trying to drive the other competitors’ out of the market. This was again reinstated from the commission ruling in the case of Fast Track Call Cab Pvt. Ltd. v ANI Technologies Pvt. Ltd [4].  

This case was related to predatory pricing of Ola Cabs. The commission in this case observed that for determining the abuse of dominance (predatory pricing) the company should hold a dominant position in the market for a considerable amount of time.  From a logical perspective, the existence of dominant position as a pre-requisite to determine the case of predatory pricing is not correct because the very reason that a company is using the strategy of predatory pricing is to attract consumers which a dominant company might already have. So, it doesn’t necessarily have to a dominant company to use the strategy of predatory pricing even a new company in the market can also use such practices to attract consumers which can amount to unfair competition. 

For instance, in Jio’s case when it was alleged that Jio was using the predatory pricing tactics by granting free data and voice mails, the TRAI has observed that Jio’s case cannot fall under the predatory pricing strategy because, Jio was a new entrant to the market and it cannot have dominance. This was stated as penetrative pricing. In my view, the strategy of penetrative pricing by the company which is already in dominant position in a different market should also be considered anti-competition because of the very fact that it already has an established consumer base but for a different product. Like in the case of Jio, even before entering the market, Reliance which runs the Jio communication had the power to influence its consumers to its new product. But since it was new to the telecom industry escaped the bars of predatory pricing and abuse of dominance. 

One of the notable developments is that the change in the FDI policy of the E-commerce sectors in the year 2019 which enforces certain mandatory compliances formalities like not allowing the e-commerce sectors to restrict the sellers to exclusively sell its product on only one particular platform and authorises the e-commerce platforms to maintain level playing field. In the compliance of the FDI guidelines the e-commerce sectors were mandator to submit a compliance report to the reserve bank of India. These kind of compliance mechanisms are keeping the fair competition in the market alive. 

Another important aspect that requires an attention when dealing with the predatory pricing is the concept of “Collective Dominance”. Unlike in India, the European union recognises the principle of collective dominance. The EU has observed that “for a collective dominance to exist in a market the entities should be linked in such a way that they adopt same conduct in the market”. In Indian competition law regime, the dominant position according to section 4 can only be held by a single entity rather than collective entities. But given the understand of E-commerce developments lately the collective dominance is prone to exist among the competitors in the market. 

CONCLUSION: 

Despite the fact that a few practices can be named Pro-consumer, with regard to the Indian Competition law system, there is a quick requirement for guidelines of this pricing tactics as rules or amendments in the Act to explicitly characterize the term and give the standards and the limitations. Further there is a need for strongly recognising the Concept of Collective dominance. 

RECOMMENDATIONS:

• The Concept of collective dominance in India should be recognised. 
• The standard procedure for determining the relevant market needs a reconsideration. 
• A latest statistical analysis of market share of online entities and dominance over the brick and motor stores is required. 

References

¹ Section 4, Competition Law, 2002 

² Case No. 17 of 2014.

³ Case No. 80 of 2014.

⁴ Case No. 6 & 74 of 2015.