Explained: Predatory pricing claims against Shopee; why CCI dismissed them

What were the allegations of violation of competition norms against Shopee?

Praveen Khandlewal, the general secretary of the Confederation of All India Traders (CAIT), had submitted information to the CCI claiming the company sells various products at extremely low prices with the intention to eliminate competition from small retailers. In his complaint, Khandlewal alleged Shopee’s deep discounting tactics, including flash sales of products for Re.1, Rs 9 and Rs 49, were aimed at attracting a large base of customers and consumer preference data which the company could use to its advantage. He also claimed Shopee had employed similar discounting practices as allegedly followed by Amazon and Flipkart.

CAIT has previously objected to Shopee being excluded from a list of 54 Chinese apps that were banned by the Centre last month. CAIT argued that Shopee should also be banned as it is owned by SEA Limited, which also owns Garena: Free Fire, a popular mobile game that was among the 54 apps restricted in India.

CAIT has alleged that Shopee incorporated a company SPPIN India Private Ltd for operations in India in violation of FDI rules that mandate prior government approval for investment from countries that share a land border with India.

What were the findings of the CCI?

The CCI concluded in its analysis that Shopee did not hold significant market power as it is a relatively new entrant in a market with well established players.

“… though the allegation is that Shopee is following similar discounting practices as allegedly done by Amazon and Flipkart, it does not appear to the Commission that Shopee possesses significant market power, much less dominance, at this stage,” the CCI said in its order.

Experts have noted that establishing that a business is engaging in predatory pricing requires that the enterprise be a dominant player in the relevant market, besides establishing that its goods or services are being marketed below cost and that sub-tactics are being used with the intention to eliminate competition.

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