How Deep Discounts and Predatory Pricing Strategy Trigger Legal Trouble 🐊

What looks like a clever discount today could become a legal headache tomorrow. Every business wants growth, but chasing it through aggressive discounting can come at a cost. For many companies, especially in today’s competitive and digitally disrupted market, deep discounts feel like a fast track to higher sales. But behind the scenes, margins shrink, brand value weakens, and legal risks start to surface—especially when discounting drifts into a predatory pricing strategy that regulators are increasingly targeting.

The pricing game is shifting. It’s no longer just about staying competitive. It’s about staying compliant. Regulatory scrutiny is rising, especially around deep discounting and the use of a predatory pricing strategy. India’s Competition Commission (CCI) has recently set new cost-based rules to assess such practices in digital markets. This sends a clear message that pricing needs to be both strategic and defensible.

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Disadvantages of Deep Discounting Strategy

Companies often lean on discounts to gain or protect market share. At scale, even small price cuts mean millions in foregone revenue.

Consider a mid-tier supermarket chain that matches the online prices of major players to retain foot traffic. The move keeps them “in the game,” but margins tighten. Competitors respond with even steeper cuts. It becomes a race to the bottom.

This “volume at any cost” model feels safe—until it’s not. Deep discounting may work in the short term, but it conditions buyers to wait for sales and erodes pricing power in the long run. Worse, it invites regulatory scrutiny in today’s compliance-heavy environment.

What Is Australia’s Position on Discounting and Predatory Pricing Strategy?

In India, the CCI recently updated its regulations to help assess alleged predatory pricing more clearly. It now uses a sector-neutral, cost-based framework to determine whether businesses are pricing below their production cost to drive out competition.

Australia takes a similar stance. Selling below cost isn’t illegal in itself, but if a business with market power does so in a way that substantially lessens competition, it may breach Section 46 of the Competition and Consumer Act.

For businesses, especially those with scale or platform power, this matters. Your discounting strategy could be interpreted as market misuse—even if that’s not your intention.

What Global Crackdowns on Predatory Pricing Strategy Are Really About

India’s update is more than local law—it signals a broader global trend. Regulators want clarity, consistency, and fairness. They want businesses to justify prices with production data, not just market behaviour.

The CCI rejected market value as a benchmark. Why? Because it reflects perception, not cost. Discounts based on what customers “will pay” may make sense commercially, but they don’t meet compliance standards if they conceal an intent to undercut rivals unfairly.

For multinational companies or those eyeing cross-border expansion, this sets a precedent. Pricing needs not just to work—it needs to withstand scrutiny.

Why Value-Based Pricing Works Better Than Predatory Pricing Strategy

Now more than ever, value-based pricing is your most powerful lever. It’s not just about charging more. It’s about charging right—anchoring your price to the real value your product or service delivers.

Look at a logistics platform that bundles predictive delivery insights with freight services. Rather than undercutting competitors, it prices higher—but communicates why: lower loss rates, better delivery times, smarter forecasting. Customers stay for results, not deals.

In contrast, we’ve seen high-growth B2B SaaS providers lose profitability chasing enterprise clients through aggressive volume discounts. Without a clear value story, they win deals but lose cash flow and bargaining power.

A Framework for Strategic, Compliant Pricing for Businesses

Here’s how businesses can structure pricing that performs and complies:

Audit your cost base — Go beyond headline margins and get clear on your average variable cost—this forms the foundation for legal and strategic pricing decisions. Knowing your true cost to serve is critical, especially as regulators like the CCI focus on production cost benchmarks when assessing predatory pricing.

Map customer segments to value metrics — Don’t just set prices based on what competitors charge. Link pricing to what your clients actually value—like time saved, increased revenue, or reduced operational risk. This builds stronger business cases and helps justify premium pricing where it’s earned.

Limit blanket discounts — Avoid defaulting to across-the-board price cuts. Instead, target discounts based on customer lifetime value or strategic goals, such as growing wallet share or entering new verticals. Thoughtful discounting keeps value perception strong and protects your margins.

Set internal thresholds — Before approving large discounts, especially in tendering processes or online platforms, require teams to present cost-based justifications. This creates discipline and reduces the risk of unintentional non-compliance.

Document decisions — Keep pricing processes transparent. Build internal playbooks, note assumptions, and track decisions. If a regulator ever questions your approach, a clear audit trail can show that your pricing is grounded, deliberate, and compliant.

Competing Without Undercutting

With regulators like the CCI moving towards stricter, cost-based scrutiny, the path forward is clear. Businesses must price with intent and evidence.

This means revisiting any predatory pricing strategy—whether intentional or not—and ensuring it won’t raise red flags. Discounting still has a place, but only as part of a well-documented, strategic plan. For large organisations, the risks of legal exposure and brand damage far outweigh the benefits of a quick revenue hit.

Customers today also care about fairness and trust. Transparent, value-driven pricing strengthens loyalty and brand credibility, especially in digital and B2B environments where relationships matter.

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Winning With Smart, Lawful Pricing

The smartest companies don’t chase “cheap.” They champion value. They know that slashing prices to win short-term volume often undermines long-term brand equity, customer trust, and profitability.

This means the pricing conversation needs to evolve. It’s no longer about staying under the competitor’s price. It’s about clearly communicating the value behind your offering—and backing that up with a strategy that protects margins, complies with the law, and avoids the pitfalls of a predatory pricing strategy.

If your team’s still relying on heavy discounts to stay competitive, now’s the time to pause and rethink. Let’s talk about how your business can shift from risky discounts to smart, value-driven pricing. Reach out if you’d like a second look at your current strategy or just want to chat through ideas. We are here to help.

For a comprehensive view of maximising growth in your company, Download a complimentary whitepaper on Future Proof Your Pricing Strategy.

Are you a business in need of help aligning your pricing strategy, people and operations to deliver an immediate impact on profit?

If so, please call (+61) 2 9000 1115.

You can also email us at team@taylorwells.com.au if you have any further questions.

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