[i] Guest, Gauging the Scheme of Predatory Pricing: The Case of Shopee Pvt. Ltd., IndiaCorpLaw (2022), indiacorplaw.in/2022/04/gauging-the-scheme-of-predatory-pricing-the-case-of-shopee-pvt-ltd.html. [x] Predatory Pricing Row: CCI Mbrows Out CAIT`s Plea Against Shopee, Inc42 Media (2022), inc42.com/buzz/predatory-pricing-row-cci-throws-out-caits-plea-against-shopee/ (last accessed 20 May 2022). In Vaibhav Mishra v. Sppin India Pvt. Ltd.[ix], the ICC found that Shopee did not have significant market power in the market and currently held a smaller dominant position for which there was no prima facie evidence of a breach of section 4 of the Competition Act 2002. In this case, Sppin India Pvt. Ltd. was founded in July 2021 and operates an e-commerce platform called Shopee. Vaibhav Mishra (the informant) alleged under paragraph 19(1)(a) that Shopee contravened sections 3 and 4 of the Competition Act. It was alleged that Shopee had used a discriminatory pricing strategy, for example by selling products such as kurtis, cups and wallets for Rs 9, hindering smaller players and having a negative impact on the market.
In this case, the discriminatory pricing strategy was related to predatory pricing, which is anti-competitive under subparagraph 4(2)(a)(ii) of the Act. Shopee responded to these allegations by saying it is “committed to supporting and empowering Indian SMEs” and has helped thousands of local businesses connect with customers. [x] Although CCI analyses this and explains that the “modus operandi” is similar to Flipkart and Amazon, i.e. as a result of a similar discount practice, the claims were rejected under Article 26(2) of the Act on the grounds that Shopee does not hold a dominant position, which is an essential condition within the meaning of Article 4, Paragraph 2 of the Act. The CCI also noted that Shopee was launched in India in 2021, while players like Amazon, Nykaa, Flipkart and so on have been operating for a reasonable amount of time. Previously, in In Re: All India Vendors Association[xi], CCI considered the online market to be a separate market and therefore did not hold Flipkart in a dominant position. The move was a wake-up call for the e-commerce platform, as its shares are only valued in the online marketplace and not globally, which includes both online and offline marketplaces. In the case of Shopee, the Commission opted for the lateral interpretation provided for in that article. It is clear that TCC`s submission is similar to the decision in Fast Track Call Cab Pvt. Ltd.
and Jio. For an undertaking or group to acquire a dominant position, market control and influence are essential, which has a significant negative effect on competitors with a lower market share. It is therefore clear that dominance is determined by factors such as market share, size, resources, structure, vertical integration, barrier to entry and consumer dependence. [iv] [vi] Bharti Airtel Ltd. v. Reliance Industries Ltd. & Anr., CCI Case No. 03/2017. It must be noted that CCI based its decision in Shopee on the fundamental elements of sections 3 and 4 of the Act.
It is clear that the absence of an “abuse of dominance” under the law is considered an advantage by some companies. Even if the shopee does not have significant market power, the predatory pricing strategy can influence the rest of the competitors in the market. It`s true that not all discount policies are predatory pricing, but if the big discounts happen at the market player level, the rest of the startups, offline retailers, and small businesses looking to enter the market may suffer. Therefore, a strict provision on predatory pricing is necessary, which should concern possible future cases. `An abuse of a dominant position referred to in paragraph 1 exists where an undertaking or group: (a) imposes, directly or indirectly, unfair or discriminatory conditions: (i) the conditions governing the purchase or sale of goods or services; or (ii) the purchase or sale price (including predatory pricing) of goods or services.” Predatory pricing is a strategy in which sellers impose such a low price in order to eliminate or eliminate competition from the market. Generally, it is adopted by companies to increase their market power. It is determined by two factors, the structure of the market and the position of the player in the market. [i] This concept was implicit in section 4 of the Competition Act 2002 in the context of “abuse of dominant position”. Explanation (b) of Division 4 states that “the sale of goods or the provision of services at a price below the prescribed costs of producing the goods or providing services for the purpose of lessening competition or eliminating competitors.” This, in turn, must be tracked over a sustainable period of time. However, the law does not explicitly mention the term “loss compensation” in order to maintain a predatory pricing claim. However, in Transparent Energy Systems Pvt Ltd v. TECPRO Systems Ltd [ii], the Competition Commission of India (ICC) stated that there must be planning to compensate for losses incurred after the market has risen again and competitors have already been squeezed out.
In this case, the four factors used to determine predatory pricing policy have been defined, (a) prices are below costs, (b) compensation for losses after the market recovers, (c) the sole objective of crowding out competition, and (d) existing competition is crowded out. Therefore, in order to accuse a company of applying a predatory pricing strategy, it is necessary to demonstrate its dominant position and the reasonable time it has spent. It was stated in In Re: Johnson and Johnson Ltd [iii] that “the essence of predatory pricing is to set prices below one`s own costs in order to eliminate a competitor.” .