Latest news with #Compat

Business Standard

Volume-based discounts do not amount to discriminatory pricing: SC

The Supreme Court (SC) on Tuesday ruled that offering volume-based discounts does not amount to discriminatory pricing under the Competition Act, 2002, unless such discounts are applied differently to equivalent transactions. A Bench of Justices Vikram Nath and Prasanna B Varale upheld a decision of the now-defunct Competition Appellate Tribunal (Compat). 'The order of the Compat is affirmed. A cost of ₹5 lakh is imposed on Kapoor Glass for prolonged litigation,' the court said. A volume-based discount, also known as a quantity discount or bulk discount, is a pricing strategy where the price per unit of a product or service decreases as the total purchase quantity increases, encouraging customers to buy more by offering a lower price for larger orders. This will have a significant impact on the competition law landscape and market dynamics, experts said. 'The judgment provides legal certainty for companies, particularly dominant enterprises, to design pricing models that reward bulk buyers without risking Competition Commission of India (CCI) scrutiny. This is relevant for industries like pharmaceutical, fast-moving consumer goods, and industrial supply, where volume discounts are common,' said former Additional Solicitor General and senior advocate Sanjay Jain. The apex court verdict came 11 years after the appeal was filed in 2014. Kapoor Glass, a manufacturer of glass ampoules and vials, had filed a complaint saying that a dominant supplier of neutral borosilicate glass tubes was engaging in discriminatory pricing. It alleged that the supplier extended preferential discounts and commercial terms to its joint venture entity, which was disadvantageous to other buyers in the market. CCI had found the supplier, Schott, guilty of abusing its dominant position under the Competition Act, 2002, imposed a fine of ₹5.66 crore, and passed a cease-and-desist order. Schott appealed the decision before Compat, which reversed the CCI's order, saying that volume-based discounts do not automatically qualify as discriminatory unless they are applied unequally to similarly situated buyers in comparable transactions. The now-defunct Compat had also imposed a fine of ₹1 lakh on Kapoor Glass, which has now been enhanced by the SC to ₹5 lakh. 'The decision is a pragmatic step that prevents over-regulation of legitimate business practices and ensures that competition law does not stifle commercial incentives which benefit consumers through lower prices. Upholding the validity of volume-based discounts will enable companies to structure discount schemes with confidence, provided they maintain transparency and uniformity,' Jain said. Alay Razvi, managing partner of law firm Accord Juris, said after the verdict, 'Companies can confidently use incentives like bulk discounts, tiered pricing, and loyalty schemes so long as they are fair and accessible to similarly situated buyers.' Jain said the verdict will strengthen the threshold for CCI investigations, which may extend the benefit to consumers. 'The Commission may adopt a more cautious approach to initiating probes into pricing practices and focus on cases with clear evidence of market foreclosure or consumer harm,' he said. The judgment brings Indian competition law closer to international standards, where volume-based discounts are permitted unless they create exclusionary effects in the form of predatory pricing, loyalty rebates, etc., Jain said. 'This enhances India's attractiveness as a business destination. In the EU, the Intel case (2017) clarified that rebates are lawful unless they foreclose competitors—a principle echoed in the ruling. Similarly, US antitrust law under the Sherman Act permits volume discounts absent anti-competitive intent,' he said. Jain, however, cautioned that the CCI's ongoing probes into technology giants like Google and Amazon may be influenced by this newly set judicial precedent. 'Legalising bulk discounts may further lead to new disputes over complex pricing models, particularly in digital markets (e-commerce, app stores), where discounts are often tied to exclusivity or platform policies,' he said.