India’s New Cost Regulations: Stabilizing Fair Competition in Digital Markets

The Competition Commission of India (CCI / The Commission) has recently enacted the CCI
(Determination of Cost of Production) Regulations, 2025 (Regulations), 1 which is a
significant regulatory step that marks a new phase in how India enforces its competition laws.
These rules will replace the 20092 framework and are intended to deal with the difficulties in
cost determination in cases of alleged predatory pricing, primarily in the rapidly evolving
digital markets. This article examines the key features of the new regulations, analyzes how
the CCI has approached cost determination in predatory pricing cases, compares the Indian
approach to that of the European Union (EU) and the United States (US), and evaluates the
new regime's challenges and potential solutions.

(Section 4 of the Competition Act, 2002 defines a “dominant position” as a position of

strength that allows an enterprise to operate independently of competitive forces or to
influence the market or competitors in its own favour. “Predatory pricing,” as per
Explanation (b) of Section 4, means selling goods or services below the cost determined by
regulations, with the intent to reduce competition or eliminate competitors from the market.
For pricing to be considered predatory under the Act, three conditions must be met: the
enterprise must hold a dominant position in the relevant market, the pricing must be below
the regulated cost benchmark, and there must be an intention to drive competitors out of the
market.) 3

A new approach to Cost Determination vis-à-vis recent CCI Regulations

The 2025 Regulations replace the previous, more rigid sector-specific requirements with a
sector-agnostic, case-by-case methodology for determining the cost of production. Notably, in
addition to the usual average variable cost, the rules now allow the use of Long-Run Average
Incremental Cost (LRAIC) and Average Total Cost (ATC) as benchmarks for determining
whether the pricing of a dominating firm is predatory. The flexible approach here will be
significant for the sectors where cost structures are sometimes complicated and do not fit
neatly into the traditional categories, such as the digital markets sector.

Another innovative approach is the explicit inclusion of factors such as depreciation and sunk
costs in the total cost calculation. This inclusion ensures that long-term investments and
capital expenditures are also considered and not overlooked. Another addition is that the
regulations allow the CCI to turn to external specialists, such as economists and cost
accountants, to assist with complex cost assessments, however, the final decision-making
authority still rests with the commission. Furthermore, the regulations clarify that "market
value" cannot be used as a proxy for actual costs, therefore shifting the focus of the analysis
to measurable production costs instead of fluctuating market perceptions.

Predatory Pricing and Cost Determination through the lens of CCI

1
The Competition Commission of India (Determination of Cost of Production) Regulations, 2025. <Available
here>
2
The Competition Commission of India (Determination of Cost of Production) Regulations, 2009. <Available
here>
3
Section 4, The Competition Act, 2002. <Available here>
The CCI's approach to predatory pricing has been influenced by landmark rulings that
emphasised comprehensive cost analysis. In NSE / MCX-SX,4 the CCI held that the National
Stock Exchange engaged in “annihilating” or “destructive” pricing by offering zero-priced
services in the currency derivatives segment. The Commission found that the waiver of
transaction charges, data feed fees, and reduced deposit levels by NSE constituted below-cost
pricing, which violated Section 4 of the Competition Act. Further, in this ruling, the
importance of cost benchmarks was underscored, specifically the average variable cost, in
demonstration of predatory intent. However, it did not explicitly label NSE’s pricing as
predatory.

In Fast Track Call Cab v. ANI Technologies,5 the CCI dismissed claims against Ola,
emphasizing that predatory pricing necessitates both dominance and below-cost pricing. The
Commission ruled that Ola did not have a dominant position in Bengaluru's radio taxi
industry, attributing its rise to incentives and discounts rather than anti-competitive activities.
The NCLAT6 upheld this decision, stating that the evidence is not adequate to prove market
abuse.

In spite of all the innovative efforts brought in by these regulations, few challenges still
persist. Unlike many other jurisdictions, the burden of proof in India is lower, as the
Competition Act does not require the complainant to demonstrate recoupment. This lower
burden of proof could be a risk of excessive enforcement, which may hinder the legitimate
competitive practices, particularly in sectors like digital commerce, which are innovative and
rapidly growing.

Comparative Outlook: EU and US Approaches

A comparison of predatory pricing laws in different jurisdictions shows interesting

similarities and notable differences, which highlights the complexity of this issue. The
European Union regime employs official cost benchmarks such as Average Avoidable Cost
(AAC) and LRAIC, which were established in landmark cases such as AKZO Chemie7 and
Wanadoo Interactiv,8 with a focus on multi-product firms and the possibility of cross-
funding. The EU does not demand explicit proof of recoupment, which is in contrast to the
approach followed in the US. The regime in the EU focuses on the overall competitive
implications of below-cost pricing, with the goal of preventing the foreclosure of
equally efficient competitors and maintaining market structure. This preventive approach sets
the EU framework apart by allowing action even when there's no clear evidence of recovering
losses. It strikes a balance between cracking down on anti-competitive behaviour and
protecting fair, competitive pricing.

In contrast, the United States has a higher standard for establishing predatory pricing.
According to the Brooke Group v. Brown & Williamson 9 standard, plaintiffs have to prove
both pricing below an appropriate measure of cost (typically average variable cost) and a
dangerous probability of recoupment. This dual requirement is meant to avoid over-
deterrence and ensure that only genuine anti-competitive behaviour is penalised.
4
National Stock Exchange of India Ltd. v MCX Stock Exchange Ltd, 2011. <Available here>
5
Fast Track Call Cab Pvt. Ltd. v ANI Technologies Pvt. Ltd., 2017. <Available here>
6
Fast Track Call Cab Pvt. Ltd. v Competition Commission of India, Competition Appeal (AT) No. 20 of 2017.
<Available here>
7
AKZO Chemie BV v Commission of the European Communities, Case C-62/86. <Available here>
8
Wanadoo Interactive, COMP/38.233. <Available here>
9
Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 1993. <Available here>
India's new regulations are more similar to the EU model in terms of cost benchmarks, but,
like the EU, do not require recoupment analysis. This highlights a key challenge in the Indian
approach, which is finding the right balance between preventing anti-competitive practices
and fostering innovation through healthy competition.

Critical Analysis: Shortcomings and Solutions

The 2025 Regulations are indeed a step forward in the competition regime, however, there
are still several gaps and challenges that need to be addressed. First, the sector-agnostic
approach, while offering flexibility, falls short in providing clear guidelines for allocating
shared costs on digital platforms. These platforms often spread infrastructure, data, and R&D
across multiple services. Without clear rules, this can lead to inconsistent or subjective
evaluations, especially when external experts are brought in without a standard process in
place.

Second, the absence of a recoupment requirement may penalize aggressive but valid pricing
strategies that benefit consumers in short-term periods. Without recoupment analysis, there is
a risk of harming competition and innovation, especially in emerging digital markets where
scale and network effects are crucial for growth.

To tackle these challenges, India should adopt cost attribution standards tailored specifically
for digital platforms. This would help address the unique nature of platform markets more
effectively. A recoupment analysis, either through law or the CCI’s practices, would help in
clarifying the line between anti-competitive predatory behaviour and fair competition.
Furthermore, creating transparent expert panels and sharing detailed methodologies for public
feedback could further boost consistency and accountability. Finally, periodic reviews of the
regulations would guarantee that the framework keeps pace with technological and market
developments, instilling hope for a more effective and balanced enforcement regime.

Concluding Remarks

The CCI's 2025 cost determination regulations represent a substantial shift in India's
competition law landscape, notably with regard to digital marketplaces and predatory pricing.
While the new framework adds much-needed flexibility and sophistication, it also brings
about new challenges that need to be overcome in order to achieve a balanced and effective
enforcement regime. In the upcoming years, it will be essential to protect both consumer
welfare and the competitive process by incorporating global standards and adjusting them
according to the Indian setting.