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Fixed cost not to be included in predatory pricing: CCI

Amid the corporate race to capture higher market share by any possible means, Competition Commission has said fixed cost would not be taken into account when deciding on predatory pricing by a manufacturer.

PTI|
Jun 15, 2008, 03.31 PM IST
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NEW DELHI: Amid the corporate race to capture higher market share by any possible means, Competition Commission has said fixed cost would not be taken into account when deciding on predatory pricing by a manufacturer.

"The Commission has always maintained that fixed cost will not be considered while charging a company for under- pricing a product. The Advisory Committee has also now approved the Commission's approach," CCI acting Chairman Vinod Dhall said.

"If a product like Nano car is introduced in the market, there was a general view in the Committee, that such cases should not be considered predatory in nature," Dhall added.

Tatas are likely to roll out the world cheapest car Nano around Diwali.

The decision will help large corporates who had raised concerns with the Commission about the inclusion of fixed cost while adjudicating the charges of predatory pricing.

"The Committee approved the Commission's approach that for determination of costs, average variable cost should be considered as the cost for predatory pricing," he said.

According to the Commission, a dominant player can be accused of predatory pricing if it sells its products below average variable cost with the intention of eliminating competition.
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