Commerce Minister Piyush slams e-commerce giants for predatory pricing

Loopholes in the law

Moving on to “predatory pricing”… Well, that’s a real problem! And it’s as old as time. And the government has done nothing about it.

For years, small retailers have complained that e-commerce operators like Amazon and Walmart-acquired Flipkart are pricing goods below cost as a strategy to kill competition. While they lose money in the short term as competitors close stores, big retailers gain monopolies and price gouge millions of consumers.

Free competition is the lifeblood of a market economy. Section 4 of the Competition Act, 2002 prohibits “unfair or discriminatory” pricing by abusing a “dominant position.” To ensure fair competition and eliminate monopolies and trusts, the Act established a regulatory body, the Competition Commission of India (CCI), to act against monopolies.

But there is a major anomaly in the Competition Act. A commercial entity can only be caught for “predatory pricing” if it has the advantage of “dominant position in the relevant market.” Players like Amazon and app-based taxi services like Ola and Uber have started getting caught when they offer huge discounts.

However, the Competition Commission took the position that the mere fact that a company had strong financial results or offered large discounts did not prove unfair competition. Most of them were new entrants who did not have a proven “dominant position” in the market in which they operated. The ruling against these companies therefore failed due to a restrictive interpretation of section 4 of the Competition Act.

Recently, in Vaibhav Mishra v. Sppin India, also known as the “Shopee case”, the Competition Commission rejected the claim that online marketplace Shopee engaged in predatory pricing, ruling that the company did not have a dominant position in the online market and therefore could not be penalised.