We just launched engagement data! Lowering your prices just the right amount gives you a better shot at market penetration and at being competitive in a tightly contested field. However, there is a point when such competitive pricing becomes problematic—when it becomes predatory pricing. It can be hard to distinguish fair, competitive pricing from illegal predatory pricing. Read on to find out where the boundaries lay and to ensure that your company is remaining legally competitive with its pricing.
Predatory pricing is a pricing strategy , using the method of undercutting on a larger scale, where a dominant firm in an industry will deliberately reduce its prices of a product or service to loss-making levels in the short-term. The difference between predatory pricing and competitive pricing is during the recouping phase of lost profits by the dominant firm charging higher prices. With there being fewer firms in the market causing consumers to have fewer choices between these products or services these higher prices results in consumer harm. First stage, is the predation , where the dominant firm offers a good or service at a below-cost rate, which reduces the firm's immediate profits in the short-term.
Official websites use. Share sensitive information only on official, secure websites. Predatory pricing poses a dilemma that has perplexed and intrigued the antitrust community for many years. On the one hand, history and economic theory teach that predatory pricing can be an instrument of abuse, but on the other side, price reductions are the hallmark of competition, and the tangible benefit that consumers perhaps most desire from the economic system.
Predatory pricing is seen as abuse of dominant position under section 4 of the Act. Factors to consider while determining dominant position of an enterprise are provided under section 19 4 of the Act. These are, inter alia , market share of the enterprise, size and resources of the enterprise, dependence of consumers on the enterprise and existence of entry barriers.