This analysis will develop a theory of anti-competitive behaviour based on the complaint lodged by Nia Jax Inc. against Varied Fixtures Ltd. The complaint alleges that Varied Fixtures is selling a product, “Nippy”, at a price below its acquisition cost, causing financial pressure on Nia Jax, the only other authorised supplier in Zambia. This response will identify the specific anti-competitive conduct, explain its potential harm to the competitive process, and consider a possible efficiency defence that Varied Fixtures might raise.
(i) The Alleged Anti-Competitive Conduct
The conduct alleged in the complaint is abuse of a dominant position through predatory pricing. This falls under the provisions of the Zambian Competition and Consumer Protection Act 2010 (CCPA).
To establish this conduct, two key elements must be considered: dominance and abuse. First, a firm must hold a ‘dominant position’ in a relevant market. Section 15 of the CCPA defines a dominant position as a position of economic strength that allows a firm to “prevent effective competition being maintained on the relevant market” and behave “to an appreciable extent independently of its competitors, customers or consumers”. Given that Nia Jax and Varied Fixtures are the “only authorized suppliers” of “Nippy” in Zambia, the market is a duopoly. In such a concentrated market, it is highly probable that the Competition and Consumer Protection Commission (‘the Commission’) would find that Varied Fixtures possesses a dominant position.
Second, this dominance must be ‘abused’. Section 16(1) of the CCPA prohibits any abuse of a dominant position. Section 16(2) provides a non-exhaustive list of abusive practices, with section 16(2)(h) explicitly identifying “predatory pricing” as an abuse. Predatory pricing is the practice of a dominant firm deliberately setting prices at a very low level, often below its own costs, with the aim of eliminating or disciplining a competitor (Jones et al., 2021). The core of Nia Jax’s complaint—that Varied Fixtures charges a price “below what it pays to acquire the product from the manufacturer”—is a direct allegation of pricing below cost and is the classic hallmark of predatory pricing. Therefore, the conduct being alleged is an abuse of a dominant position via predatory pricing, contrary to section 16 of the CCPA.
(ii) Harm to the Competitive Process
Predatory pricing harms the competitive process in a two-stage process. In the initial phase, consumers may temporarily benefit from the artificially low prices. However, the primary goal of this conduct is not to benefit consumers but to harm competition.
The first stage is the ‘predation’ or ‘exclusionary’ phase. By pricing below its acquisition cost, Varied Fixtures makes it impossible for an equally efficient competitor like Nia Jax to compete profitably, as Nia Jax buys the product at the same price. As stated in the complaint, Nia Jax “will not be able to continue operating in the market for much longer” if the low pricing continues. This is the intended effect: to drive the competitor out of the market (foreclosure). The harm here is the elimination of a viable competitor, reducing market plurality and consumer choice.
The second stage is the ‘recoupment’ phase. Once the competitor, Nia Jax, has been forced to exit the market, Varied Fixtures would become the sole supplier of “Nippy” in Zambia, transforming from a dominant firm into a monopolist. At this point, it would be free from competitive constraints and would be able to raise its prices to a supra-competitive level (a level far higher than the pre-predation price). Through these high prices, Varied Fixtures would recoup the losses it incurred during the predation phase and then proceed to earn monopoly profits. The ultimate harm to the competitive process is, therefore, the distortion of the market structure, leading to higher prices, reduced choice, and lower quality or innovation for consumers in the long term (Whish and Bailey, 2021).
(iii) Potential Efficiency Defence
While predatory pricing is viewed as a serious anti-competitive practice, the CCPA provides for an efficiency defence. Under section 16(3), conduct that appears to be an abuse of dominance may be permissible if the firm can demonstrate that its actions contribute to “improving the production or distribution of goods or promoting technical or economic progress” and that consumers are allowed “a fair share of the resulting benefit”.
Varied Fixtures could attempt to construct a defence on this basis. For instance, it might argue that its low pricing strategy is a short-term promotional campaign designed to rapidly increase the market penetration of “Nippy”. It could claim that by quickly building a larger customer base, it can achieve economies of scale in its distribution and marketing operations within Zambia. This increased efficiency, it would argue, could lead to sustainably lower costs and prices in the future, ultimately benefiting consumers. This argument frames the below-cost pricing not as an attempt to exclude a rival, but as an investment in market creation that will generate long-term efficiencies.
However, such a defence would be difficult to sustain. The Commission would likely be sceptical, as pricing below the direct cost of acquiring the product itself strongly suggests an exclusionary intent rather than a genuine efficiency-seeking strategy. Varied Fixtures would bear the burden of proving that the claimed efficiencies are real, substantial, and could not be achieved through less anti-competitive means, and that a fair share of these benefits would indeed be passed on to consumers.
References
- Competition and Consumer Protection Act 2010 (No. 24 of 2010) (Zambia).
- Jones, A., Sufrin, B. and Dunne, N. (2021) EU Competition Law: Text, Cases, and Materials. 7th edn. Oxford University Press.
- Whish, R. and Bailey, D. (2021) Competition Law. 10th edn. Oxford University Press.
