Excessive Pricing – Don’t Get Caught In The Mittal!

Dominant firms are prohibited by the Competition Act 1998 from charging excessive prices to the detriment of consumers. Why only dominant firms? The presumption is that a small firm will lose its customers to its competitors if it charges excessive prices. Customers might have nowhere to turn if a dominant firm charges an excessive price. What exactly is an excessive price and why is charging an excessive price a competition problem?

One of the objects of the Competition Act is to provide consumers with competitive prices and product choices. There are, however, pro-competitive instances in which prices should be allowed to rise significantly. For example, when there is a shortage of a product, a price rise will serve to ration the available supply to those buyers who value it the most. The high price also acts as a signal to suppliers, calling forth extra supply from those who might not have been interested in producing for the market at a lower price. Without such price signals,