1. What is predatory pricing. Types of predatory pricing.

Test for Predation

Predatory Pricing is the practice whereby an undertaking prices its product so l
ow that competitors cannot live with the price and are driven from the market . Pr
edatory pricing is an abuse of a dominant position and often resulting in fines
for the concerned undertaking.
In order for predatory pricing to be proven, it needs to be shown to have the in
tention of removing competition, which is also an area of controversy, with many
believing it should be the effect which is analysed. According to Bork, there a
re three techniques to predation; price cutting in which the losses during the wa
r will be proportionally higher for the predator than the victim . The second bein
g disruption of distribution patterns and finally the misuse of government proce
sses.
Predatory Pricing refers to a practice of driving rivals out of business by sell
ing at a price below the cost of production. PP is a commercial strategy by whic
h a dominant firm first lowers its price to a level which will ultimately force
its rivals out of the market. When the latter have been successfully expelled, t
he company can raise the prices again and reap the rewards.However, the simplici
ty of the definition masks the extremely complicated nature of this concept.
PP is analyzed under antitrust/competition laws as illegal monopolization or att
empt to monopolize. As stated earlier, under the Act, it is dealt with under Sec
tion 4 which prohibits the Abuse of Dominant Position by an enterprise. Abuse of Dom
inant Position refers to the conduct of an enterprise9 that enjoys a dominant posi
tion which is defined under the Competition Act to mean a position of strength, e
njoyed by an enterprise, in the relevant market, in India, which enables it to
(i) operate independently of competitive forces prevailing in the relevant marke
t; or
(ii) affects its competitors or consumers or the relevant market in its favour.
PP is an exclusionary practice.Although the enforcement provisions of the Act ha
ve not yet been notified, it can be expected that the CCI when interpreting Sect
ion 4 of the Act will look into an allegation of PP not only when it has actuall
y produced the pursued exclusionary effect, such as the elimination of competiti
on or creation of an entry barrier, but also when such a conduct is likely to atta
in these goals. A similar approach is followed in the European Community where t
he European Court of Justice has held that it must be possible to penalize preda
tory pricing whenever there is a risk that competitors will be eliminated since
the aim pursued, which is to maintain undistorted competition, rules out waiting
until such a strategy leads to the actual elimination of competitors.
On the otherhand Excess Prices Refers to prices set significantly above competit
ive levels as a result of monopoly or market power. However, in practice, in abs
ence of a conspiracy or price fixing agreement or evidence of market power stemm
ing from high concentration, it is very difficult to establish a threshold beyon
d which a price may be considered excessive or unreasonable. Because the basic m
ethod of organizing production in a market economy is through the price system,
price flexibility is critical. Prices fluctuate in order to bring supply and dem
and into equilibrium.
Temporary shortages in supply or increases in demand will cause prices to rise a
nd provide incentives for increased production and entry of new suppliers. Moreo
ver, it should be noted that price and/or profit comparisons between different f
irms, markets, or countries are fraught with legal and economic problems. Attemp
ts by government to control or force a roll back of prices that are not a result
of restrictions on competition are inconsistent with the philosophy underlying
competition policy.

-------------------------------------------------------------Test to Determine Predatory Pricing :

Over the years, many tests have been devised to aid antitrust/competition agenci
es in sorting out predatory behaviour from tough competition. Some of the more i
mportant tests are as follows:
1. Price-Cost Tests (PCT)
The key question which PCT seeks to answer is whether
a company is incurring losses that are rational only if they are part of a preda
tory pricing strategy. PCT involves comparing objective cost and price data to p
rovide information about whether an enterprise is actually engaging in PP tactic
s. Most jurisdictions use some type of PCT when analysing PP issues. Nevertheles
s, there is a divergence of approach with different jurisdictions adopting diffe
rent measures of cost to detect PP. Some of the key cost measures which are in u
se are (i) Marginal Cost (MC); Average Variable Cost (AVC); Average Avoidable Co
st (AAC); Average Total Cost (ATC).
The
(A)
(B)
(C)
(D)

commonly adopted PCT s are as follows:

The Areeda-Turner Test;
The ATC Test;
The AAC Test;
The Above-Cost Price Test;

2. The Recoupment Test This test assumes that PP is happening and questions whet
her it is likely to succeed in light of the characteristics of the relevant mark
et, the predator firm and its target(s). Specifically this test aims to determin
e whether a firm s PP campaign would be likely to eliminate and deter competition,
and whether it is likely that the predator firm will then be able to amass at l
east enough supra-competitive profits to recover the losses it sustained during
the attack.
3. The Predatory Intent Test This test aims to address the more subjective quest
ion of whether a firm intended to engage in PP. It has been a rather controversi
al area in PP analysis. The European Union has expressly incorporated intent in it
s predation analysis (along with PCT), whereas, others, such as the United State
s, are more skeptical towards intent as an indicator that predatory conduct is occ
urring or is likely to harm competition.
------------------------------------------------------------Types of Predation :
1. Predation aimed at attaining a monopoly by driving out one s competition.
2. Predation designed to obtain monopoly power by compelling competitor to coope
rate the predatory firm.
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Competition Act, 2002
Components Of Competition Act :
The rubric of the new law, Competition Act, 2002 (Act, for brief) has essentiall
y four compartments :
I.Anti-Competition agreements Firms enter into agreements, which may have the potential of restricting competi
tion. A scan of the competition laws in the world will show that they make a dis
tinction between horizontal and vertical agreements between firms. The former, n
amely the horizontal agreements are those among competitors and the latter, name
ly the vertical agreements are those relating to an actual or potential relation
ship of purchasing or selling to each other.

A particularly pernicious type of horizontal agreements is the cartel. Vertical

agreements are pernicious, if they are between firms in a position of dominance.
Most competition laws view vertical agreement generally more leniently than hor
izontal agreements, as, prima facie, horizontal agreements are more likely to re
duce competition than agreements between firms in a purchasers seller relationsh
ip, an obvious example that comes to mind is an agreement between enterprises de
aling in the same product or product.
Such horizontal agreements, which included membership of cartels, are presumed t
o lead to unreasonable restrictions of competition and are therefore presumed to
have an appreciable adverse effect on competition. In other words, they are per
se illegal. The underlying principle in such presumption of illegality is that
the agreements in question have an appreciable anti-competitive effect. Barring
the aforesaid four types of agreements, all the others will be subject to the ru
le of reason test in the Act.
----------------------------------------------------------------------------------------------------------------II.Abuse of Dominance Dominant position has been appropriately defined in the Act in terms of the posi
tion of strength, enjoyed by an enterprise, in the relevant market, in India, wh
ich enables it to :
(i) operate independently of competitive forces prevailing in the relevant marke
t; or
(ii) affect its competitors or consumers or the relevant market, in its favour.
Section 4 enjoins, No
ition is the position
t which enables it to
the market or affects
favour.

enterprise shall abuse its dominant position. Dominant pos

of strength enjoyed by an enterprise in the relevant marke
operate independently of competitive forces prevailing in
its competitors or consumers or the relevant market in its

Dominant position is abused when an enterprise imposes unfair or discriminatory

conditions in purchase or sale of goods or services or in the price in purchase
or sale of goods or services. Again, the philosophy of the Competition Act is re
flected in this provision, where it is clarified that a situation of monopoly pe
r se is not against public policy but, rather, the use of the monopoly status su
ch that it operates to the detriment of potential and actual competitors.
At this point it is worth mentioning that the Act does not prohibit or restrict
enterprises from coming into dominance. There is no contract whatsoever to preve
nt enterprises from coming into or acquiring position of dominance. All that the
Act prohibits is the abuse of that dominance position. The Act therefore target
s the abuse of dominance and not dominance per se. This is indeed a welcome step
, a step towards a truly global and liberal economy.
---------------------------------------------------------------------------------------------------------------------III. Mergers & Aquisition :
Mergers and acquisitions (or combinations) refer to a situation where the owners
hip of two or more enterprises is joined together. A merger is said to occur whe
n two or more companies combine to form a new company. In this, two or more comp
anies may merge with an existing company or they may merge to form a new company
. The assets and liabilities of the transferor company become the assets and lia
bilities of the transferee company after the merger. The purpose of a merger is
usually to create a bigger entity, which accelerates growth and leads to economi
es of scale. However, a merger may lead to unwanted socio- economic implications
that are often frowned upon.

The MRTP Act, 1969 had become obsolete in certain respects in the light of inter
national economic developments relating more particularly to competition felt to
shift the focus from curbing monopolies to promoting competition so that the In
dian market is equipped to compete with the markets worldwide.
The Competition Act (CA) attempts to make a shift from curbing monopolies to cur
bing practices that have adverse effects on competition both within and outside
India. It is interesting to see that under the new regime the legislature has ch
osen to regulate unfair trade practices under only the Consumer Protection Act 1
986 and not the Competition Act. In 2007 the Competition (Amendment) Act introdu
ced significant changes to the competition law regime . Most noteworthy of these
changes was the introduction of a mandatory notification process for persons un
dertaking combinations (Mergers and acquisitions) above the prescribed threshold
limits. In early 2008 the Competition Commission of India also promulgated and
circulated a draft of the Competition Commission (Combination) Regulations.
The regulations provide a framework for the regulation of combinations which inc
lude M&A transactions or amalgamations of enterprises. The merger provisions are
not yet in force. Nonetheless, it is only a matter of time before the relevant
provisions will be notified.
One of the most significant provisions of CA, Section 5, which defines combinatio
n (Mergers and acquisitions) by providing threshold limits in terms of assets an
d turnover is yet to be notified. There is no clarity as to when it will be made
effective. At present, any acquisition, merger or amalgamation falling within t
he ambit of the thresholds constitutes a combination.
================
Monopolization and other abusive practises :
Monopolization To take over and control (something or someone) completely : to use (something)
in a way that prevents others from using it.
Non-price monopolization practices:
Investments in R&D, advertising, product quality could be used to force exit;
By tying-in sales the monopolist in one market might extend into a second market
;
Similarly by making the first product incompatible with the rivals of second prod
uct;
Refusal to supply and rising rivals costs may also be anti-competitive.
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2. Differentiate between globalization and global competition in refference to U
.K, U.S.A and E.U countries alongwith Special refference to IPR and cross border
relation ship.
Globalization Globalization describes an ongoing process by which regional economies, societie
s, and cultures have become integrated through a globe-spanning network of commu
nication and trade. The term is sometimes used to refer specifically to the inte
gration of national economies into the international economy through trade, fore
ign direct investment, capital flows, migration, and the spread of technology. H
owever, globalization is usually recognized as being driven by a combination of
economic, technological, socio-cultural, political, and biological factors. The
term can also refer to the transnational circulation of ideas, languages, or pop
ular culture through acculturation.
People around the globe are more connected to each other than ever before. Infor
mation and money flow more quickly than ever. Goods and services produced in one
part of the world are increasingly available in all parts of the world. Interna

tional travel is more frequent. International communication is commonplace. This

phenomenon has been titled "globalization."
--------------------------------------------------------------------------Global competition Global competition is the existence of competing organizations that serve intern
ational customers. Access to global customers has increased through enhanced com
munications, improved shipping channels, reduction of barriers, and centralized
finance authorities.
Michael E. Porter believes that national level productivity is the only meaningf
ul concept of national or global competiveness. He finds it to be inappropriate
to define competitiveness solely onthe basis of exchange rates, interest rates,
cheap and abundant labour, bountiful natural resources, government policies or m
anagement practices.
Classical theory focused factors of production such as land, labour and natural
resources as the drivers of competitiveness of a nation. With the passage of ti
me the paradigm shift brought by technological break throughand globalization ha
s overshadowed the classical theory. The concept of competitiveness has become m
ore dynamic and evolving. The evaluation parameter for competiveness of a nation
must include parameters like global strategy, foreign investments, segmented ma
rket,differentiated products, economies of scope and scale, innovation etc.
Productivity (and thus competitiveness) is viewed as a function of political, le
gal and macro-economic context. The interplay of these basic functions leads to
productivity which provides competitiveness advantage to nations. The quality of
micro-economic business environment and the sophistication of company operation
and strategy determine the quality of microeconomic business environment. Stabi
lity of political and legal system creates an environment where competitiveness
is possible. But it is the macroeconomic environment that creates competitivenes
s.
----------------------------------------------------------------------------------------Global competitiveness report 2016 - 2017
Europe Faced with impending Brexit and geopolitical crises spilling over into the regio
n, Europe finds itself in critical
condition in many respects. Nevertheless, the region which includes the EU28, Ice
land, Norway, Switzerland,
the Balkans, and Turkey still performs above the global average in terms of compet
itiveness (4.72 average score in Europe versus an average score of 4.11 among th
e rest of the world). This is driven by the performance of a group of regional c
hampions, notably Switzerland, which leads the global rankings for the eighth co
nsecutive year. The top 12 includes seven more European countries: the Netherlan
ds (4th), Germany (5th), Sweden (6th), the United Kingdom (7th), Finland (10th),
Norway (11th), and Denmark (12th).
Accelerating innovation efforts will be crucial to maintain current levels of pr
osperity, and Europe can
expect high returns from focusing its resources on nurturing its talent.Among th
e basic education indicators, the regional gaps are most apparent for math and s
cience education.On attracting and retaining international talent, although one
European country (Switzerland) achieves the top global scores, the average for t
he region as a whole is low; this does not bode well for the creation of a vibra
nt European knowledge economy.
---------------------------------------------------------------------United States -

The United States remains stable overall in 3rd position, showing improvement in
areas including macroeconomic stability, the result of a declining budget defic
it. Non-tariff barriers appear less burdensome
than in the past. However, stagnating productivity has called for a downward rev
ision of growth prospects,
highlighting the need for a renewed competitiveness agenda even in the top-ranki
ng economies. Despite
being in the top 10 best-ranked economies and recent positive news showing recov
ering income growth across all income groups, the United States does not rank in
the top 10 on any of the basic requirements
pillars (institutions, infrastructure, macroeconomic environment, health and pri
mary education).
On the efficiency enhancers subindex, it is not within the top 10 on goods marke
t efficiency or technological adoption. The position of the United States is dri
ven by innovation, business sophistication, market size, financial market develo
pment, labor market efficiency, and higher education and training. These finding
s highlight important challenges if the country is to remain in the top 10 over
the long term, and possible bottlenecks indicating the supply-side constraints t
hat are holding back progress and reducing the effectiveness of monetary policy
for jump-starting growth.
------------------------------------------------------------------United Kingdom Currently the United Kingdom is still one of the most competitive economies in t
he world, moving up three places to 7th on the back of marginal score improvemen
ts. Note that the data were collected before the Brexit vote, so initial repercu
ssions from the vote are not captured by this year s Index. Although the process a
nd the conditions of Brexit are still unknown, it is likely to have a negative i
mpact on the United Kingdom s competitiveness through goods and financial markets
as well as market size and, potentially, innovation.
Competitiveness of the UK economy has, up to now, rested on highly efficient goo
ds and labor markets (9th and 5th, respectively); business processes are highly
sophisticated (7th) and supported by a high level of digital readiness by both b
usinesses and consumers (3rd). Last year saw a partial recovery in the macroecon
omic environment (up 23 to 85th) and an improvement in financial market conditio
ns, although in general scores were mostly stable.
------------------------------------------------------------------------------------------------------------------------India India climbs for the second year in a row, to 39th. Its 16-place improvement is
the largest this year. India s competitiveness has improved across the board, in p
articular in goods market efficiency, business sophistication, and innovation. T
hanks to improved monetary and fiscal policies, as well as lower oil prices, the
Indian economy has stabilized and now boasts the highest growth among G20 count
ries. Recent reform efforts have concentrated on improving public institutions (
up 16), opening the economy to foreign investors and international trade (up fou
r), and increasing transparency in the financial system (up 15).
Still, a lot needs to be done. The labor market is segmented between workers pr
otected by rigid regulations and centralized wage determination (112th), especia
lly in the manufacturing sector, and millions of unprotected and informal worker
s. The efficiency of the domestic market (81st) is hindered by fiscal regulation
s that allow federal states to levy different levels of value-added taxes; large
, publicly owned enterprises further reduce the overall efficiency of the econom
y, especially in the utilities sector and the financial market, where there is g
rowing concern about the incidence of non-performing loans.

Finally, lack of infrastructure (68th) and ICT use (120th) remain bottlenecks. I
mprovement has been slow in recent years and further investment will be necessar
y, especially to connect rural areas and make sure they can equally benefit from
and contribute to the country s development.
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