Predatory pricing by e-commerce companies: Government’s knee-jerk reaction may aggravate MSMEs’ concern

Ease of Doing Business for MSMEs: At a key gathering of BRICS ministers and officials in Brazil last week, Commerce and Industry minister Piyush Goyal had flagged risks associated with the ‘predatory pricing’ strategies allegedly being adopted by companies in India. This brings us to the question of what is predatory pricing under Indian antitrust law, when does predation raise concerns and how should India tackle it. Another question that readers may raise is whether they have come across examples of possible predatory pricing in their day to day lives and is predatory pricing all that bad.

What’s Predatory Pricing

The traditional theory of predatory pricing is straightforward. A company indulging in predatory pricing, which is already a dominant enterprise, sets its prices so low for a sufficient period of time that its competitors leave the market and others are deterred from entering. For predation to be rational, there must be some expectation that these present losses (or foregone profits), like any investment, will be made up by future gains.