“Free is not Always Fair”: A Study of Predatory Pricing in Platforms

CCI digs into whether the company is abusing that dominance, including through predatory pricing as described under Section 4(2)(a)(ii).

Introduction

Predatory pricing is not just some hypothetical debate; rather, it is a real headache, especially in digital markets where “innovative” pricing strategies can hide nastier motives. When a giant keeps prices unbelievably low or even free for ages, they are not always doing it to be nice. Sometimes, it is about kicking out the competition and grabbing the market for themselves. Competition Act, 2002 goes straight at this. Section 4(2)(a)(ii) bans selling below cost if the goal is to wipe out the rivals. But — in these matters — just offering cheap prices does not make you a predator. Indian Courts and the Competition Commission of India (CCI) check three things: Is the company dominant? Are they selling below a fair cost benchmark? And are they really trying to bury their competitors? Recognising this threat, the Competition Act, 2002 expressly prohibits predatory pricing as an abuse of dominant position under Section 4(2)(a)(ii), defining it as the sale of goods or provision of services below cost with the intent to reduce competition or eliminate competitors. Courts and the CCI have adopted a cautious yet interventionist approach, as reflected in landmark decisions such as in MCX Stock Exchange Ltd. v. National Stock Exchange of India Ltd. ¹, the Court called out zero pricing that dragged on as exclusionary. In Uber India Systems (P) Ltd. v. CCI², huge investor-funded discounts made regulators suspicious about what Uber was really up to. Still, the courts do not just jump the gun. In Fast Track Call Cab (P) Ltd. v. ANI Technologies (P) Ltd.³, they made it clear: Just fighting hard on price does not always count as abuse. All these cases show the law is still finding its feet, trying to guard real competition without killing off new ideas, not easy in the platform world, where it is tough to measure dominance or costs the old way.

Concept of predatory pricing

Meaning and definition

Section 4, Competition Act, 2002 does not beat around the bush: Predatory pricing is when you sell stuff below cost to try and knock out the competition. But on the other hand, it proves that someone is abusing their power. To prove predatory pricing, you need all three things:

1. Prices below the cost;

2. A dominant player; and

3. A real plan to drive rivals out from the market.

All three elements must be proved to establish abuse of dominant position.

Economic rationale

From an economic perspective, predatory pricing is generally considered an irrational business strategy unless the firm adopting it expects to recover its losses in the future.5⁴ No one wants to lose money forever. The only reason to sell at a loss is if you are planning to ramble prices and win it all back once you have cleared the field. For this to work, a few things must line up. First, you need deep pockets. Not just anyone can handle bleeding cash, you need serious funding or rich investors backing you up.

Second, the market needs high entry barriers. Maybe it costs a fortune to start, maybe customers refuse to switch, or maybe the rules make it a nightmare for newcomers. If it is easy for others to jump in when prices go up, the whole strategy flops. And competitors must be weak or stretched thin. If they cannot survive the price war or raise new money, they are likely to fold.

Digital platforms are made for this. They have got access to endless venture capital, so they can play the long game very easily. Network effects help them grow fast, and once a platform gets big, it is a huge hassle for new players to break in. That is why predatory pricing is not just a theory but here — it is a real danger.

Platform markets and pricing strategies

Nature of platform markets

Platform markets work differently from traditional ones. Here, a company stands in the middle, connecting two or more different groups. Think about e-commerce sites bringing buyers and sellers together, or ride-hailing apps linking drivers with passengers. Food delivery apps do the same — restaurants on one side, hungry customers on the other. One thing that really stands out in these markets is the network effect. The more people join, the better the platform gets for everyone. If a lot of sellers list their products, more buyers show up. More buyers then attract even more sellers. This cycle pushes platforms to chase user growth as fast as they can.

There is also a big advantage in size. Once the basic digital setup is there, each new user barely adds to the platform’s costs. So, it gets cheaper to serve each person as the platform grows. That is why you see these companies offering low prices — they can afford to, at least for a while.6⁵

Data is another big weapon. Platforms gather loads of information about what people do, like, and buy. They use this data to tweak their services, target ads, and generally stay ahead of the competition. Taken together, all these traits make it tempting for platforms to use bold pricing, sometimes even selling at a loss, just to pull in more users and build up their lead.

Below-cost pricing in platform markets

We often see platforms selling things for less than they paid, or even giving stuff away for free. This is not just about knocking out rivals. It is about growing fast — grabbing as many users as possible, keeping current ones hooked, and making the platform the go-to choice. That is why you see all those deep discounts, cashback offers, and promotions on e-commerce, ride-hailing, or food delivery.7⁶

The game here is simple: Get big, get popular, and make the platform essential. Once that happens, the company can make its money back later, through commissions, ads, or premium features.

For competition authorities, this creates a problem. It is tough to tell when low prices are just healthy competition, and when they cross the line into predatory pricing. Not every below-cost offer is a problem. If it helps consumers, pushes efficiency, or drives innovation and does not hurt competition, it is usually fine. But if a dominant platform uses below-cost pricing just to squeeze out rivals, that is when it gets flagged as predatory under the Competition Act, 2002.

Legal framework in India

Competition Act, 2002

In India, the main law that tackles predatory pricing is Explanation (b) to Section 4, Competition Act, 2002. This section bans companies from abusing a dominant position, and it spells out that selling below cost to knock out competitors counts as predatory pricing. The CCI has the job of investigating and acting against companies that cross this line. When the CCI looks at a case, it starts by figuring out what the relevant market is, both the product and the area. Next, it checks if the company holds a dominant position there. If so, the CCI digs into whether the company is abusing that dominance, including through predatory pricing as described under Section 4(2)(a)(ii).

Cost standards

To decide if a company is pricing below cost, the CCI usually uses the average variable cost (AVC) test. If prices drop below AVC, it is a strong clue that the company is not even covering its basic costs, which points to predatory behaviour.8⁷ But platform markets make this tricky. Digital platforms have odd cost structures, high fixed costs to build the system, but low costs to add each new user. Plus, they often shift money around between different user groups. Because of all this, nailing down the AVC is not simple, and it makes it much harder for authorities to say for sure whether a company’s pricing is truly predatory or just an aggressive way to grow and compete.

Judicial interpretation of predatory pricing: An analysis of Indian case law

Let us dig into how Indian Courts and competition authorities have shaped the rules around predatory pricing. Over time, they have built up a thorough, effects-focused approach, especially in markets where network effects are big and it is tough for new players to enter. In MCX Stock Exchange Ltd. v. National Stock Exchange of India Ltd.⁸, the CCI really got into the details of what National Stock Exchange (NSE) was up to in the currency derivatives market. NSE dropped its transaction fees to zero, not just for a few months, but for almost three years. NSE argued this was just competitive, introductory pricing. The CCI did not agree over it. CCI said it is one thing to have low prices for a short launch period, but dragging out zero pricing for years, especially by a company with deep pockets, starts to look like an attempt to shut out rivals and take over the market. The CCI pointed out that NSE could afford this because it made so much money elsewhere, which let it cover the losses. In the end, the CCI made it clear: When a company with market power keeps prices below cost for a long time and has the resources to do it, that is a strong sign of predatory intent.

The judicial approach was further refined in Uber (India) Systems (P) Ltd. v. CCI⁹, where the Supreme Court took on the whole issue of deep discounting in ride-hailing. Uber was losing about Rs 204 per ride, and the Court was not convinced this made commercial sense — especially since these losses kept piling up, bankrolled by investors. The big takeaway? At the first stage of looking into a case, the CCI does not have to prove everything dominance, recoupment, or actual abuse, to start an investigation. If there is a reasonable suspicion of anti-competitive harm, that is enough to dig deeper. This really boosted the CCI’s power to act early, which matters a lot in fast-moving digital markets. But courts have not swung too far the other way, either.

At the same time, competition jurisprudence in India has also drawn clear boundaries to prevent over-regulation of competitive pricing. In Fast Track Call Cab (P) Ltd. v. ANI Technologies (P) Ltd.¹⁰, the CCI pushed back against the idea that every bit of aggressive pricing counts as predatory. Just pricing below cost is not enough to prove abuse. You need to see dominance and an actual chance that the company can recover its losses. Here, the ride-hailing market was still open, with several competitors, so the risk of one player taking over just was not there. The CCI made it clear: Competition law should not get in the way of price wars that help consumers, especially when the industry is still finding its feet.

Further judicial clarity was provided in Schott Glass India (P) Ltd. v. CCI¹¹, the CCI said you cannot just look at costs. You must consider if the company has real market power and whether it is pricing hurts rivals or locks out new ones. The CCI stressed the need to see the bigger picture, how dependent customers are on the dominant firm, and whether the pricing really threatens competitors’ survival. Complementing this approach, the Supreme Court in CCI v. SAIL¹² affirmed that the CCI possesses wide discretionary powers to initiate investigations where pricing conduct raises credible concerns of unfair or exclusionary practices. The Court reminded everyone that competition law is there to stop problems before they get out of hand, not just to clean up the mess afterward. Early action can be the difference between a healthy market and one that has been damaged beyond repair. Taken together, these judicial and quasi-judicial pronouncements reflect an evolving and nuanced approach to predatory pricing in India.

Courts and the CCI have consistently recognised that while low pricing is a natural and desirable feature of competitive markets, sustained below-cost pricing by dominant enterprises, especially when supported by financial strength, cross-subsidisation, and high entry barriers, poses a serious threat to market structure and a long-term consumer welfare. The emphasis on detailed market analysis, duration of pricing conduct, financial capability, and competitive effects demonstrates a shift from rigid cost tests to a more holistic assessment, particularly suited to platform-driven and digital markets.

Conclusion

Predatory pricing in digital and platform markets is a tricky problem for Indian competition law. There is a real need to strike a balance, encouraging price wars that help consumers, but stopping dominant companies from abusing their power and pushing out rivals for good. Sure, cheap prices can feel great at first, but when a dominant firm uses below-cost pricing backed by its financial muscle, cross-subsidies, and powerful network effects, it can mess up the market and hurt competition in the long run. Indian Courts and the CCI have taken a thoughtful route here. In big cases like MCX Stock Exchange Ltd. v. National Stock Exchange of India Ltd.¹³, Uber India Systems (P) Ltd. v. CCI¹⁴, and Fast Track Call Cab (P) Ltd. v. ANI Technologies (P) Ltd.¹⁵, they have made it clear: Just being cheap is not anti-competitive on its own. We have got to look at dominance, intent, how long the pricing lasts, and whether it shuts out competition. The courts’ willingness to step in early, but not over-regulate, shows they are trying to keep pace with what is really happening in digital markets. Looking ahead, India needs a flexible, effects-based approach, one with clearer cost rules and guidance for different sectors, to make sure competition law protects both fairness and innovation as the digital economy keeps changing.