20 Jan Predatory Pricing in India
Predatory Pricing in India
Relevance for Prelims: Predatory Pricing, Competition Commission of India, Daily Current Affairs for UPSC
Relevance for Mains: Monopsony
Predatory Pricing is an act of reducing the prices of products drastically to eliminate competition. Recently many E-Commerce companies like Shoppe, Amazon, and Flipkart have been allegedly involved in this Pricing to carve out a bigger market share by offering huge discounts.
This creates a Monopsony condition where there are only buyers who are buying all the products at the decreased margin and selling through multiple channels to eliminate the prevailing competition.
Problem with Predatory Pricing
- ASYMMETRIC REPERCUSSIONS: The consumers may get benefit from the decreased prices but on the same hand it has affected the livelihoods of millions of brick-and-mortar shops that buy the product at a limited margin and sell with marginal profit.
- WIDENS SOCIAL DISPARITIES: Access to the capital with Multi-National Companies like Amazon and Shopee puts them in the front seat in buying products at large scale which further causes deepening the gap.
- ANTI-COMPETITIVE: Recently, many distributors in Maharashtra alleged unfair treatment by Colgate with respect to Business-to-Business Companies like Jiomart which buys the same toothpaste at 30% less price for what is being paid by Distributors. This makes the market anti-competitive.
To restrict this practice, E-Commerce Rules 2021 have put a ban on Flash Sales or back-to-back sales to create a level playing field. The Rules also mandate that none of the related parties are allowed to use any consumer information for unfair advantage.
In 2019, the Competition Commission of India held Google guilty of misuse of its dominant position in the search engine marketplace. Under the Indian jurisprudence, Anti-Trust laws consider predatory pricing as discriminative and unfair under section 4 of the CCI Act, 2002. Strengthening the laws will not only prevent predacious pricing but will create a conducive environment for the business ecosystem.
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