{"id":224185,"date":"2020-01-13T16:30:05","date_gmt":"2020-01-13T11:00:05","guid":{"rendered":"https:\/\/www.scconline.com\/blog\/?p=224185"},"modified":"2021-04-07T15:35:39","modified_gmt":"2021-04-07T10:05:39","slug":"excessive-pricing-in-india-to-regulate-or-not","status":"publish","type":"post","link":"https:\/\/www.scconline.com\/blog\/post\/2020\/01\/13\/excessive-pricing-in-india-to-regulate-or-not\/","title":{"rendered":"Excessive Pricing in India: To Regulate or Not"},"content":{"rendered":"<p style=\"text-align: justify;\"><span style=\"color: #008000;\"><b>Introduction<span class=\"Apple-converted-space\">\u00a0<\/span><\/b><\/span><\/p>\n<p style=\"text-align: justify;\">It is very common in India, particularly for middle-class people to talk and crib about the rising prices of goods and services. It is not uncommon to find a huge divergence between the public perception about rising prices and the official data pertaining to the inflation rate. Is there a legal way to control prices?<\/p>\n<p style=\"text-align: justify;\">The European Court of Justice (ECJ) in <a href=\"#_ftn1\">[1]<\/a>\u00a0<i>United Brands Co. <\/i>v<i>. Commission of the European Communities<\/i> highlighted that Article 82 of the European Commission Treaty (ECT) directly applies to conduct which is harmful to the consumers. Such conduct includes excessive and unfairly high prices. The ECJ also provided a cost-based test for dealing with cases related to excessive pricing. The test highlights a two-fold approach wherein the regulators have to identify the profit margin i.e. the different cost of production and prices applied and also the price of other competing products.<span class=\"Apple-converted-space\">\u00a0<\/span><\/p>\n<p style=\"text-align: justify;\">The test laid down under the <a href=\"#_ftn2\">[2]<\/a> <i>United Brands case<\/i> has been acknowledged in several other European cases such as<a href=\"#_ftn3\">[3]<\/a>\u00a0<i>General Motors Continental NV <\/i>v<i>. Commission of the European Communities<\/i> and<a href=\"#_ftn4\">[4]<\/a>\u00a0<i>Terezakis <\/i>v<i>. Commission.<\/i> On the contrary, the debate on excessive pricing is at a very nascent stage in India and has been limited to the pharmaceutical sector. Predominantly, the challenge before the Competition Commission is to maintain a balance between static and dynamic efficiencies, in order to avoid undermining of investment incentives, while ensuring that consumers\u2019 interest is protected. In this article, we discuss whether a blanket restriction on excessive pricing based upon the two-stage test laid down in\u00a0<i>the United Brands<a href=\"#_ftn5\">[5]<\/a> case<\/i> is viable.<span class=\"Apple-converted-space\">\u00a0<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"color: #008000;\"><b>Undeveloped Jurisprudence on \u201cExcessive Pricing\u201d in India<img loading=\"lazy\" decoding=\"async\" class=\" wp-image-193806 alignright\" src=\"https:\/\/blog.scconline.com\/wp-content\/uploads\/2018\/03\/Bhumesh-Verma-225x300.jpg\" alt=\"\" width=\"186\" height=\"248\" srcset=\"https:\/\/www.scconline.com\/blog\/wp-content\/uploads\/2018\/03\/Bhumesh-Verma-225x300.jpg 225w, https:\/\/www.scconline.com\/blog\/wp-content\/uploads\/2018\/03\/Bhumesh-Verma-45x60.jpg 45w, https:\/\/www.scconline.com\/blog\/wp-content\/uploads\/2018\/03\/Bhumesh-Verma.jpg 270w\" sizes=\"auto, (max-width: 186px) 100vw, 186px\" \/><\/b><\/span><\/p>\n<p style=\"text-align: justify;\">The Indian counterpart of Article 84 of ECT is Section 4 of the Competition Act, 2002, which prohibits the abuse of dominance by dominant firms. In <a href=\"#_ftn6\">[6]<\/a>\u00a0<i>Flynn Pharma Ltd.\u00a0<\/i>v<i>.\u00a0Competition and Markets Authority, <\/i>the Commission recognised the practical difficulties associated with delineating \u201cexcessive pricing\u201d.<a href=\"#_ftn7\">[7]<\/a> Factors such as the lack of substantial evidence on costs, availability of substitutes from competitors and the legitimate resistance in exceeding its jurisdiction by setting prices of goods\/services have hindered competition authorities from examining and defining \u201cexcessive pricing\u201d in depth.<span class=\"Apple-converted-space\">\u00a0<\/span><\/p>\n<p style=\"text-align: justify;\">Quite recently, an \u201cexcessive pricing\u201d allegation against the anti-cancer drug\u00a0Trastuzumab\u00a0was rejected in <i>Biocon Ltd. v. F. Hoffmann-La Roche AG<\/i> on the grounds that the initial increase in drug price was attributable to the huge costs incurred in research and development (R&amp;D) and innovation. <a href=\"#_ftn8\">[8]<\/a><\/p>\n<p style=\"text-align: justify;\">In the absence of a conclusive determination of the term \u201cexcessive\u201d and what factors shall be computed to brand a certain price as \u201cexcessive\u201d is a grey area. While there are several arguments against \u201cexcessive pricing\u201d with respect to the hardship caused to the consumers, it must be noted that a blanket restriction on excessive pricing may not be viable or reasonable.<span class=\"Apple-converted-space\">\u00a0<\/span><\/p>\n<p style=\"text-align: justify;\"><strong><span class=\"Apple-converted-space\">\u00a0<\/span>For example, \u201cExcessive pricing\u201d can be justified in the following circumstances.<\/strong><\/p>\n<p style=\"text-align: justify;\"><span style=\"color: #0000ff;\"><b>1. When \u201cExcessive Pricing\u201d Triggers Competitive Behaviour<\/b><\/span><\/p>\n<p style=\"text-align: justify;\">Anti-competitive behaviour stems from factors that limit the ability of firms to compete on an equal platform. Market forces in a free market determine the prices of products and ensure that the price level of like products are competitive. In most situations, when a firm decides to price its products at an unreasonable or an unfairly high price, the same would promote other firms to produce low priced substitutes in order to oust the higher priced products. Therefore, in turn, the excessive pricing by one firm shall trigger competitive behaviour for other firms and benefit the consumer in the long run.<\/p>\n<p style=\"text-align: justify;\"><span style=\"color: #0000ff;\"><b>2. When the Time Period for Close Substitutes to Enter the Market is Less<\/b><\/span><\/p>\n<p style=\"text-align: justify;\">The pro-competitive behaviour of \u201cexcessive pricing\u201d i.e. to encourage other firms to capitalise and provide low priced substitutes is contingent upon the time taken by the followers to enter the market. In situations, where the time taken by other firms to enter the market is substantial, \u201cexcessive pricing\u201d may be regulated to limit hardship to the consumers. For instance, in pharma cases, the amount of expenditure on research and development required is immense and it limits the ability of other firms to enter the market expediently.<span class=\"Apple-converted-space\">\u00a0<\/span><\/p>\n<p style=\"text-align: justify;\"><span class=\"Apple-converted-space\">\u00a0<\/span>The UK Competition Appeal Tribunal in <i>Napp Pharmaceuticals case <a href=\"#_ftn9\">[9]<\/a><\/i> held that Napp was charging excessive prices as its prices and profit margins were substantially higher than its competitors. While the judgment made important observations on abuse of dominant position and excessive pricing, it can be criticised on the grounds that the competitors of Napp could capitalise and oust Napp from its dominant position.<span class=\"Apple-converted-space\">\u00a0<\/span><\/p>\n<p style=\"text-align: justify;\"><span class=\"Apple-converted-space\">\u00a0<\/span>However, the same situation does not hold true in all pharmaceutical cases\u2014in many cases, there shall be no cheaper substitutes available and would require regulation. However, if the time period required for other firms to provide close substitutes is less, excessive pricing shall trigger competitive behaviour and must not be regulated.<span class=\"Apple-converted-space\">\u00a0<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"color: #0000ff;\"><b>3. When the Entry Barriers are Not Strong<\/b><\/span><\/p>\n<p style=\"text-align: justify;\">Similarly, in situations where there are very heavy entry barriers that allow a supplier to continuously charge excessive prices, the same shall warrant regulation. For instance, a firm develops a unique technology and secures Intellectual Property (IP) protection, in such cases, the strong entry barriers shall demand regulation of \u201cexcessive pricing\u201d. However, in cases where it is comparatively easier for other firms to enter a market to develop cheaper substitutes, excessive pricing shall not require regulation.<span class=\"Apple-converted-space\">\u00a0<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"color: #0000ff;\"><b>4. Lack of Consumer Awareness with Respect to Lower-Priced Substitutes<\/b><\/span><\/p>\n<p style=\"text-align: justify;\">The lack of awareness of customers with respect to the available substitutes should not account for lack of substitutes thereby warranting regulation of \u201cexcessive pricing\u201d. In such cases, the advocacy division of the Competition Commission of India must indulge in awareness initiatives to ensure that asymmetry of information does not cause hardship to the customers.<span class=\"Apple-converted-space\">\u00a0<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"color: #0000ff;\"><b>5. Excessive Pricing Can Also be a Matter of Price Strategy<span class=\"Apple-converted-space\">\u00a0<\/span><\/b><\/span><\/p>\n<p style=\"text-align: justify;\">Excessive strategy is directly correlated to the pricing strategy of firms and the rationale behind suppliers knowingly charging an excessive rate. In certain situations, dominant entities base the pricing strategies on the higher cost of providing or merely lack of close substitutes. However, certain products bank on exclusivity and may be deliberately charged higher as a matter of strategy to create exclusivity of product and target a different base.<img loading=\"lazy\" decoding=\"async\" class=\" wp-image-214056 alignright\" src=\"https:\/\/blog.scconline.com\/wp-content\/uploads\/2019\/04\/Abhisar-vidyarthi-199x300.jpg\" alt=\"\" width=\"150\" height=\"226\" srcset=\"https:\/\/www.scconline.com\/blog\/wp-content\/uploads\/2019\/04\/Abhisar-vidyarthi-199x300.jpg 199w, https:\/\/www.scconline.com\/blog\/wp-content\/uploads\/2019\/04\/Abhisar-vidyarthi-768x1156.jpg 768w, https:\/\/www.scconline.com\/blog\/wp-content\/uploads\/2019\/04\/Abhisar-vidyarthi-40x60.jpg 40w\" sizes=\"auto, (max-width: 150px) 100vw, 150px\" \/><\/p>\n<p style=\"text-align: justify;\"><span style=\"color: #0000ff;\"><b>Conclusion<\/b><\/span><\/p>\n<p style=\"text-align: justify;\">\u201cExcessive Pricing\u201d should be regulated in sectors such as the pharmaceutical sector as there are strong entry barriers that restrict the ability of other firms to enter the market with cheaper substitutes. The essential nature of the product warrants regulation to restrict hardship caused to the customers. However, there should not be a blanket application of such regulations due to the points highlighted above.<span class=\"Apple-converted-space\">\u00a0 <\/span>Another reason for not regulating \u201cexcessive pricing\u201d is the lack of substantial evidence on costs and availability of substitutes from competitors. In cases wherein there is not sufficient evidence to show an unreasonable profit margin, regulating \u201cexcessive pricing\u201d becomes extremely difficult. Moreover, \u201cexcessive pricing\u201d does not have anti-competitive effects unless the time taken for cheaper substitutes to oust the product is substantial.<\/p>\n<hr \/>\n<p style=\"text-align: justify;\"><strong><span style=\"color: #ff0000;\">*<\/span>Bhumesh Verma is Managing Partner <\/strong>at Corp Comm Legal and can be contacted at bhumesh.verma@corpcommlegal.in.<\/p>\n<p style=\"text-align: justify;\"><strong><span style=\"color: #ff0000;\">**<\/span>Abhishar Vidyarthi<\/strong> is a <strong>Student Researche<\/strong>r with a final year student, (BA LLB), Maharashtra National Law University, Mumbai).<\/p>\n<p><a href=\"#_ftnref1\">[1]<\/a> 1978 ECR 207.<br \/>\n<a href=\"#_ftnref2\">[2]<\/a> 1978 ECR 207.<br \/>\n<a href=\"#_ftnref3\">[3]<\/a> 1976 ECR 1367.<br \/>\n<a href=\"#_ftnref4\">[4]<\/a> 2008 ECR II-11.<br \/>\n<a href=\"#_ftnref5\">[5]<\/a> 1978 ECR 207.<br \/>\n<a href=\"#_ftnref6\">[6]<\/a> 2018 CAT 12.<br \/>\n<a href=\"#_ftnref7\">[7]<\/a> 2019 CAT 9.<br \/>\n<a href=\"#_ftnref8\">[8]<\/a> <a href=\"http:\/\/www.scconline.com\/DocumentLink\/tm8aon9m\">2017 SCC OnLine CCI 21<\/a>.<br \/>\n<a href=\"#_ftnref9\">[9]<\/a> No CA98\/2\/2001.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Bhumesh Verma, Managing Partner and<br \/>\nAbhishar Vidyarthi, Student Researcher, Corp Comm Legal<\/p>\n<p>Cite as: (2020) PL (CL) January 79<\/p>\n","protected":false},"author":8808,"featured_media":193981,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[1191,45506],"tags":[18751,39246,33771],"class_list":["post-224185","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-op-ed","category-practical-lawyer-archives","tag-competition-act","tag-excessive-pricing","tag-regulate"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v26.4 (Yoast SEO v26.4) - 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It ruled that gun-jumping (when an acquiring company seeks to exercise control over a target company\u2019s business operations pre-close) can only occur when the acquiring company\u2019s action results in a lasting change in the control\u2026","rel":"","context":"In &quot;Case Briefs&quot;","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2016\/09\/ECJ.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2016\/09\/ECJ.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2016\/09\/ECJ.jpg?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2016\/09\/ECJ.jpg?resize=700%2C400&ssl=1 2x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2016\/09\/ECJ.jpg?resize=1050%2C600&ssl=1 3x"},"classes":[]},{"id":380829,"url":"https:\/\/www.scconline.com\/blog\/post\/2026\/04\/14\/ecj-interpretation-of-gdpr-on-access-rights-and-damage\/","url_meta":{"origin":224185,"position":1},"title":"Excessive Access Requests and Compensation for Non-Material Damage \u2014 EU Court of Justice\u2019s Interpretation of GDPR Explained","author":"Arushi","date":"April 14, 2026","format":false,"excerpt":"Merely alleging fear of losing control over personal data is not enough to justify compensation. If a person claims compensation based on fear that their data may be misused in the future, it must be assessed whether that fear is well founded in specific circumstances of the case.","rel":"","context":"In &quot;Case Briefs&quot;","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"GDPR on access rights","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2026\/04\/GDPR-on-access-rights.webp?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2026\/04\/GDPR-on-access-rights.webp?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2026\/04\/GDPR-on-access-rights.webp?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2026\/04\/GDPR-on-access-rights.webp?resize=700%2C400&ssl=1 2x"},"classes":[]},{"id":197506,"url":"https:\/\/www.scconline.com\/blog\/post\/2018\/06\/26\/ecj-by-adopting-a-certain-derogation-regime-and-allowing-the-capture-of-7-species-of-wild-birds-malta-has-failed-to-fulfil-its-obligations-under-eu-law\/","url_meta":{"origin":224185,"position":2},"title":"ECJ: By adopting a certain derogation regime and allowing the capture of 7 species of wild birds, Malta has failed to fulfil its obligations under EU Law","author":"Saba","date":"June 26, 2018","format":false,"excerpt":"European Court of Justice (ECJ): The ECJ has declared that Malta has failed to fulfil its obligations under EU law by adopting a certain derogation regime not complying with the strict conditions laid down by the Directive on the conservation of wild birds. Directive 2009\/147\/EC of European Parliament and of\u2026","rel":"","context":"In &quot;Case Briefs&quot;","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2016\/09\/ECJ.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2016\/09\/ECJ.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2016\/09\/ECJ.jpg?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2016\/09\/ECJ.jpg?resize=700%2C400&ssl=1 2x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2016\/09\/ECJ.jpg?resize=1050%2C600&ssl=1 3x"},"classes":[]},{"id":219946,"url":"https:\/\/www.scconline.com\/blog\/post\/2019\/09\/24\/ecj-rules-that-right-to-be-forgotten-will-not-apply-outside-europe-google-wins-the-landmark-case\/","url_meta":{"origin":224185,"position":3},"title":"ECJ rules that &#8220;Right to be Forgotten&#8221; will not apply outside Europe ; Google wins the landmark case","author":"Bhumika Indulia","date":"September 24, 2019","format":false,"excerpt":"European Court of Justice handed victory to Google by ruling that \"Right to be Forgotten\" does not needs to be applied outside Europe. A dispute arose between Google and a French privacy regulator, wherein in 2015, CNIL ordered the firm to globally remove search result listings to pages containing damaging\u2026","rel":"","context":"In &quot;Hot Off The Press&quot;","block_context":{"text":"Hot Off The Press","link":"https:\/\/www.scconline.com\/blog\/post\/category\/news\/hot_off_the_press\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2017\/06\/european-commission.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2017\/06\/european-commission.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2017\/06\/european-commission.jpg?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2017\/06\/european-commission.jpg?resize=700%2C400&ssl=1 2x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2017\/06\/european-commission.jpg?resize=1050%2C600&ssl=1 3x"},"classes":[]},{"id":209181,"url":"https:\/\/www.scconline.com\/blog\/post\/2019\/02\/01\/ecj-austrian-legislation-grating-certain-employees-a-days-holiday-on-good-friday-held-detrimental-to-other-employees\/","url_meta":{"origin":224185,"position":4},"title":"ECJ | Austrian legislation grating certain employees a day\u2019s holiday on Good Friday held detrimental to other employees","author":"Bhumika Indulia","date":"February 1, 2019","format":false,"excerpt":"European Court of Justice (ECJ): The Bench comprising of K.\u00a0Lenaerts, President; R.\u00a0Silva de Lapuerta, Vice-President; J.C.\u00a0Bonichot, A.\u00a0Arabadjiev, A.\u00a0Prechal, C.\u00a0Toader and C.\u00a0Lycourgos (Rapporteur), Presidents of Chambers, directed equal treatment for all employees until the Austrian legislation was amended. The respondent who was employed under a private detective agency was denied public\u2026","rel":"","context":"In &quot;Case Briefs&quot;","block_context":{"text":"Case Briefs","link":"https:\/\/www.scconline.com\/blog\/post\/category\/casebriefs\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2016\/09\/ECJ.jpg?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2016\/09\/ECJ.jpg?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2016\/09\/ECJ.jpg?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2016\/09\/ECJ.jpg?resize=700%2C400&ssl=1 2x, https:\/\/i0.wp.com\/www.scconline.com\/blog\/wp-content\/uploads\/2016\/09\/ECJ.jpg?resize=1050%2C600&ssl=1 3x"},"classes":[]},{"id":71601,"url":"https:\/\/www.scconline.com\/blog\/post\/2016\/09\/20\/public-wifi-providers-not-liable-for-copyright-infringements-by-users\/","url_meta":{"origin":224185,"position":5},"title":"ECJ holds that public WiFi providers not liable for copyright infringements by users","author":"Saba","date":"September 20, 2016","format":false,"excerpt":"As reported in The Wall Street Journal,\u00a0\u00a0the European Court of Justice has held that the owners of shops or businesses providing WiFi connection cannot be held liable if one of their customers uses the connection to offer content which is copyrighted, for download. 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