CCI Notifies 2025 Regulations on Cost of Production & LRAIC

Notification F.No. CCI/ Reg-COP/01/ 2025-26, Dated: 06.05.2025

The Competition Commission of India (CCI) has notified the Determination of Cost of Production Regulations, 2025, replacing the earlier norms established in 2009. These updated regulations aim to modernize and clarify the framework for calculating the cost of production, particularly in the context of assessing anti-competitive practices such as predatory pricing.

1. Key Highlights of the 2025 Regulations

1. Expanded Definition of LRAIC – The definition of Long-Run Average Incremental Cost (LRAIC) has been broadened to capture a more comprehensive view of variable and fixed costs incurred over a longer time horizon. This is especially relevant in assessing pricing strategies that may harm competition.
2. Introduction of Average Total Cost (ATC) – A new cost metric, Average Total Cost (ATC), has been introduced to serve as an additional benchmark for evaluating cost structures. This inclusion provides greater analytical flexibility when investigating pricing below cost.
3. Revised Cost Determination Methodology – The regulations outline a detailed and updated methodology for calculating production costs. This includes standardising the treatment of fixed and variable costs, accounting for depreciation, and ensuring consistency across different industry sectors.
4. Depreciation Included in Total Cost – A notable change is the explicit inclusion of depreciation in the calculation of total cost. This ensures a more accurate representation of long-term investment recovery in pricing analysis.
5. Provision for Expert Engagement – To ensure technical accuracy and objectivity, the new regulations permit the engagement of external experts or consultants to assist in cost determination where required.

2. Objective and Legal Alignment

These changes are designed to align the cost assessment framework with current economic practices and legal interpretations under Indian competition law. In cases involving predatory pricing, the cost of production is now to be determined strictly in accordance with the 2025 Regulations, providing a clearer statutory basis for enforcement actions.

The notification reflects CCI’s commitment to enhancing regulatory clarity and strengthening the analytical tools available for market oversight and anti-competitive conduct investigations.

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