![]() ![]() Consider a family-owned gas station struggling because a name brand competitor down the street is offering a member discount on gasoline. Even the practice of setting prices below a company’s own costs is not illegal, unless it becomes a viable strategy to eliminate competition. Setting prices below a competitor’s prices, or even their costs, is not unusual, and doesn’t in itself violate any laws. Why Predatory Pricing is Unlikely to Result in a Monopoly In fact, the FTC has yet to successfully prosecute any company for predatory pricing. Although the Federal Trade Commission (“FTC”) takes claims of predatory pricing seriously, and examines them closely, such claims are rarely found to be valid. Such a plan would also require the company’s short-term losses to be made up for by charging much higher prices over a long period of time once the competitors have gone out of business or left the market. This may require the use of unethical manufacturing or production practices in order to obtain products at prices far below the competition. Such a strategy could only be successful if the company could minimize losses over the low-price period. In fact, it is rare for large companies to use very low prices to drive others out of business with the intent of raising prices later. Rather, it may simply be the beginning of a seriously competitive market. For this reason, predatory pricing practices are illegal in most countries.Ī company’s decision to offer radically reduced prices is not necessarily a sign of predatory practices intended to injure competitors. Such occurrences have a seriously negative effect on the world economy as well. Once the other providers were run out of business, or bought out by the first provider, they could raise rates at their whim, putting a serious dent in consumers’ wallets. If one provider were to offer the best devices at the lowest prices, and offer consumers all-inclusive call/text/data plans for a rate far below the competition, it is likely that, in time, most consumers would migrate to that provider. For example, the widespread use of cell phone and mobile technology has created a veritable stampede of providers offering lowered price plans and high-tech devices to woo consumers to their doorstep. Competition in the marketplace not only gives consumers a choice of product and service quality, but keeps prices down. While most consumers may be of the opinion that prices can never be too low, the fact is that consumers may be ambushed if super-low pricing forces competitors out of the market, only to be followed by significant price increases. The practice of injuring or exploiting others for personal gain or profit, including predatory pricing practices.ġ580-90 Latin praedātōrius What is Predatory Pricing.Relating to the practice of plundering, pillaging, or exploitation. ![]()
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