PREDATORY PRICING: STRATEGIC THEORY AND LEGAL POLICY – AN ANALYSIS

AUTHOR – S. RAMYASHRI, LLM SCHOLAR AT SCHOOL OF EXCELLENCE IN LAW, THE TAMIL NADU Dr. AMBEDKAR LAW UNIVERSITY.

BEST CITATION – S. RAMYASHRI, PREDATORY PRICING: STRATEGIC THEORY AND LEGAL POLICY – AN ANALYSIS, INDIAN JOURNAL OF LEGAL REVIEW (IJLR), 4 (4) OF 2024, PG. 784-802, APIS – 3920 – 0001 & ISSN – 2583-2344.

ABSTRACT

Predatory pricing is a deliberate strategy where a firm sets prices below cost to eliminate competitors, gain market dominance, and later increase prices to recoup losses. This practice, though seemingly consumer-friendly in the short term, can have severe long-term effects on competition and market health. This paper’s primary components include the firm’s pricing strategy, cost structure, market power, and the timeline for recouping losses. Analysing these factors helps determine whether pricing behaviour is truly predatory. Predatory pricing manifests in various forms, including selective pricing (targeting specific markets or competitors) and aggressive discounting. Each type has distinct implications for market competition and requires different regulatory responses. The effects range from the elimination of competitors, reduced market competition, and higher prices in the long term, to potential market monopolization. These outcomes can harm consumers and the overall economic environment. Furthermore it explores the Several theories explain predatory pricing. Each theory provides a different lens through which to assess the likelihood and impact of predatory pricing. It examines Dumping, where goods are sold in a foreign market below cost, can be considered a form of predatory pricing. It involves similar tactics of price suppression to weaken foreign competition, raising concerns at the intersection of trade and competition law. It also explores both Indian and UK development of legal frameworks to address predatory pricing, with India’s Competition Act, 2002, and the UK’s Competition Act, 1998, providing the regulatory backbone. These frameworks aim to balance market freedom with the need to prevent anti-competitive practices. In the digital market, predatory pricing has unique implications due to network effects, low marginal costs, and the dominance of platform-based companies. This environment requires modernized legal approaches to ensure competitive fairness. The Monopolies and Restrictive Trade Practices (MRTP) Act, 1969, and its successor, the Competition Act, 2002, in India, have been instrumental in shaping the regulatory approach to predatory pricing. While the MRTP Act had limitations, the Competition Act provides a more robust framework to address modern market challenges.

KEYWORDS: Predatory Pricing, Dumping, Competition, Monopoly.