The Competition Commission of India (CCI) has notified the Competition Commission of India (Determination of Cost of Production) Regulations, 2025, replacing the 2009 regulations. These regulations provide the framework for determining the cost of production, which is relevant for assessing predatory pricing by dominant enterprises under the Competition Act, 2002. Predatory pricing involves selling goods or services below cost to reduce competition. The 2025 regulations, developed after public consultation, incorporate several changes to align with the evolution of competition law. Key revisions include updated definitions for ‘total cost’, ‘total variable cost’, ‘average avoidable cost’, and a clarified definition for ‘long run average incremental cost’ (LRAIC) to improve precision. The regulations clarify that experts assist the Commission in cost determination, and only parties to proceedings can dispute the determined cost. The framework is designed to be sector-agnostic, applicable across industries including digital markets, and maintains a cost-based assessment, not relying on market value as a benchmark. The scope of experts is not limited to a single professional body, allowing for diverse expertise.
GENERAL STATEMENT
The Competition Commission of India (Determination of Cost of Production) Regulations, 2025
1. The Competition Act, 2002 (the ‘Act’) aims to prevent practices having an adverse effect on competition, to promote and sustain competition in the markets, to protect the interests of consumers and to ensure freedom of trade carried on by other participants in markets, in India. The Competition (Amendment) Act, 2023 (Amendment Act) incorporated various amendments in the Act which created a need for amendment! repeal! overhauling of the various regulations framed by the Commission as well as for introduction of certain new ones. In this regard, the Commission has already notified Settlement Regulations, Commitment Regulations, Lesser Penalty Regulations, General Regulations,
2. Section 4(2)(a)(ii) of the Act identifies predatory pricing by a dominant enterprise as an abusive practice. In this context, Explanation (b) to Section 4 defines “predatory price” as the sale of goods or provision of services at a price below the cost, as determined by regulations, with a view to reduce competition or eliminate competitors. In this regard, Section 64(2)(a) of the Act empowers the Commission to make regulations w.r.t. the cost of production to be determined under clause (b) of the Explanation to section 4. Accordingly, the Commission notified the CCI (Determination of Cost of Production) Regulations, 2009 on 20.08.2009 (Cost Regulations 2009).
3. Since the enactment of the Act and the introduction of the Cost Regulations, 2009, competition law in India as well as globally, has undergone significant development. Accordingly, the Commission proposed to review the Cost Regulations 2009 wherein certain changes were proposed to keep the regulations in sync with the evolution of competition law jurisprudence. The review of these regulations is aimed to align them with modern economic theories, judicial interpretations, and international competition law practices.
4. Accordingly, the draft Competition Commission of India (Determination of Cost of Production) Regulations, 2025 along with Background Note, were put up for public consultation on the website of the Commission and comments! suggestions from the stakeholders were invited thereupon from 17.02.2025 to 19.03.2025. In response, comments from 14 stakeholders were received. The Commission has perused the comments received and in view of the same, certain changes have been incorporated in the above-mentioned draft regulations.
5. Accordingly, today, the Commission has notified the Competition Commission of India (Determination of Cost of Production) Regulations, 2025 (Cost Regulations 2025) repealing the Cost Regulations 2009 vide repeal and saving clause introduced in the Cost Regulations 2025. Further, in terms of Section 64A(b) of the Act, the present General Statement is being published along with, to provide the Commission’s response to the public comments received.
6. The definition of ‘total cost’ under Regulation 2(1)(c) has been revised to explicitly include depreciation and to exclude financing overheads, thereby ensuring a more appropriate and consistent measurement of the cost of production. In addition, based on the suggestions received, editorial refinements have been made to the definitions of ‘total variable cost’ and ‘average avoidable cost’ to improve clarity, precision, and ease of interpretation in the application of these cost benchmarks.
7. In response to stakeholder feedback noting that the definition of ‘long run average incremental cost’ (LRAIC) was unclear due to its reliance on the undefined term ‘long run average cost’, the definition has been revised and clarified in line with international best practices. The updated definition in Regulation 2(1)(c)(v) now specifies that LRAIC includes all variable and fixed costs, including sunk costs, that are directly or indirectly attributable to the production of a specific product or service. This encompasses product-specific fixed costs incurred either before or during the period under investigation. For multi-product enterprises, the definition further clarifies that common costs are included in LRAIC to the extent they are caused by or incrementally attributable to the production of the relevant product or service.
8. A stakeholder submitted that the term determining as used in Regulation 4(2) legally implies a final decision, which is the function of the Commission and cannot be delegated. In this regard, it is clarified that the draft Regulations do not envisage that the final cost determination is being delegated to experts. However, to further reinforce this position, Regulation 4 has been amended to state explicitly that experts appointed under this provision are intended solely to assist the Commission in arriving at the cost Additionally, Regulation 4 has been revised to clarify that only a party to the proceedings may dispute the cost determined by the Commission under Regulation 3.
9. Some stakeholders expressed concern that the draft Regulations lack clarity on how the Commission will assess costs in different sectors viz. digital markets. In response, the Commission notes that the Cost Regulations 2025 establish a sector-agnostic, cost-based framework that is flexible and adaptable to various industries, including the digital economy. Therefore, rather than prescribing sector-specific metrics, the framework allows for case-by-case assessment, enabling the Commission to consider the unique features and evolving dynamics of digital markets when evaluating alleged predatory conduct.
10. Few stakeholders advocated for retaining market value as an alternative cost benchmark, especially in markets where pricing may diverge from internal costs due to cross-subsidization, high fixed costs, and advertising-based models. In response, the Commission clarifies that while market value may help contextualize pricing dynamics, it does not constitute a cost benchmark, as it reflects external factors like consumer willingness to pay and perceived value. The draft regulations maintain a cost-based assessment framework grounded in measurable production costs, consistent with international best practices and jurisprudence.
11. Further, the suggestion to limit the scope of ‘experts’ under the regulations exclusively to Members of the Institute of Cost Accountants of India (ICMAI) has not been accepted. While the ICMAI is a recognised professional body, the determination of costs under these regulations may require diverse expertise, including that of Cost Accountants, Chartered Accountants, Economists, and other qualified professionals. Therefore, restricting the definition of ‘experts’ is not advisable, as it may unduly limit the Commission’s ability to engage suitable experts based on the specific needs of a case.
12. A stakeholder expressed concern that implementation of the proposed regulations may discourage firms from engaging in aggressive price competition, fearing that such conduct could trigger investigations or liability under predatory pricing provisions. It was further submitted that predatory pricing assessments should involve more than a cost-based analysis and must consider the potential for recoupment. The Commission clarifies that recoupment is not a requirement under the Act for establishing predatory pricing. Further, the regulations are procedural and only aim to provide a framework for cost determination, not to define the substantive test for predation. Accordingly, the suggestion has not been accepted.
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THE COMPETITION COMMISSION OF INDIA
NOTIFICATION
New Delhi, the 6th May, 2025
The Competition Commission of India (Determination of Cost of Production) Regulations, 2025
(No. 02 of 2025)
F.No. CCI/ Reg-COP/01/ 2025-26.—In exercise of powers conferred by clause (a) of sub-section (2) of section 64 of the Competition Act, 2002 (12 of 2003), the Competition Commission of India hereby makes the following regulations, namely: –
1. Short Title And Commencement. –
(1) These regulations may be called the Competition Commission of India (Determination of Cost of Production) Regulations, 2025.
(2) They shall come into force on the date of their publication in the Official Gazette.
2. DEFINITIONS.–
(1) In these regulations, unless the context otherwise requires –
(a|) “Act” means the Competition Act, 2002 (12 of 2003);
(b) “average variable cost” means total variable cost divided by total output during the referred period;
(c) “Cost” as used in Regulation 3 and its derivation may have reference to:
i. “total cost” means the actual cost of production including items, such as cost of material consumed, direct wages and salaries, direct expenses, depreciation, work overheads, quality control cost, research and development cost, packaging cost, administration overheads attributable to the product during the referred period;
ii. “total variable cost” means the total cost referred to in clause (i) minus the fixed cost and share of fixed overheads attributable to the product, if any, during the referred period;
iii. “total avoidable cost” means the cost that could have been avoided if the enterprise had not produced the quantity of extra output during the referred period;
iv. “average avoidable cost” is the total avoidable cost divided by the total output during the referred period, considered for estimating ‘total avoidable cost‘;
v. “long run average incremental cost” (LRAIC) means average of all variable and fixed costs including any sunk costs, that are directly or indirectly attributable to the production of a specific product or service, including any product-specific fixed costs incurred before or during the period under investigation. In the case of multi-product enterprises, LRAIC also includes a proportionate share of common costs, to the extent that such costs are caused by or incrementally attributable to the production of the product or service in question;
vi. “average total cost” is total cost divided by total output during the referred period ;
(d) “Commission” means the Competition Commission of India established under sub-section (1) of section 7 of the Act;
(e) “product” means the goods or services, as the case may be, as defined in the Act;
(f) “marginal cost” is the change in total cost that arises when the quantity produced changes by one unit.
(2) Words and expressions used but not defined in these regulations shall have the same meaning respectively assigned to them in the Act or the Companies Act, 2013 (18 of 2013), as the case may be.
3. DETERMINATION OF COST. –
“Cost” in the Explanation to section 4 of the Act shall, generally, be taken as average variable cost, as a proxy for marginal cost:
Provided that in specific cases, for reasons to be recorded in writing, the Commission may, depending on the nature of the industry, market and technology used, consider any other relevant cost concept such as average total cost, average avoidable cost, or long run average incremental cost.
4. ENGAGEMENT OF EXPERTS. –
(1) In arriving at the figures of costs, the Commission or the Director General, as the case may be, may take the help of suitable experts.
(2) Where a party to the proceedings disputes the cost determined by the Commission under regulation 3, it may, for reasons to be submitted in writing, request the Commission to appoint expert (s) for assisting in determining the cost.
(3) On consideration of the request made by a party to the proceedings, the Commission may, where it so decides, appoint expert(s) of its choice, at the cost of the party making the request, to enable it to determine the cost.
5. REQUEST FOR CONFIDENTIALITY. –
Any request for confidentiality of the documents submitted to the Commission or the Director General, as the case may be, shall be duly considered in accordance with the procedure laid down in the Competition Commission of India (General) Regulations, 2024.
6. REMOVAL OF DIFFICULTY. –
In a situation not provided for in the Act, rules or these regulations or in the matter of their interpretation, the procedure for determining the cost shall be determined by the Commission.
7. REPEAL AND SAVINGS. –
(1) The Competition Commission of India (Determination of Cost of Production) Regulations, 2009, stand repealed from the date on which these regulations come into force.
(2) Notwithstanding such repeal, –
(a) anything done or any action taken or purported to have been done or taken, or any proceedings or decision, inquiry or investigation commenced under the repealed regulations, prior to such repeal, shall be deemed to have been done or taken under the corresponding provisions of these regulations;
(b) the operation of the repealed regulations or anything duly done or suffered thereunder, any right, privilege, obligation or liability acquired, accrued or incurred thereunder, or any investigation, legal proceeding or remedy ensued thereunder, shall remain unaffected as if the repealed regulations have never been repealed;
(c) after the repeal of the Competition Commission of India (Determination of Cost of Production) Regulations, 2009, any reference thereto including in any regulations, direction or decision issued by the Commission, shall be deemed to be a reference to the corresponding provisions of these regulations.
INDER PAL SINGH BINDRA, Secy.
[ADVT.-III/4/Exty./82/2025-26]
