Predatory pricing

price dumpingaggressive undercuttingdifferential and preferential railway ratesloss-makingpredatory pricespredatory rate cutunder-cutting
Predatory pricing, also known as undercutting, is a pricing strategy in which a product or service is set at a very low price with the intention to achieve new customers (Loss leader), or driving competitors out of the market or to create barriers to entry for potential new competitors.wikipedia
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Monopoly

monopoliesmonopolisticmonopolist
The so-called predatory merchant then theoretically has fewer competitors or even is a de facto monopoly.

Barriers to entry

barrier to entryentry barrierbarriers
Predatory pricing, also known as undercutting, is a pricing strategy in which a product or service is set at a very low price with the intention to achieve new customers (Loss leader), or driving competitors out of the market or to create barriers to entry for potential new competitors.

Profit (economics)

profitprofitsprofitability
In the short term, predatory pricing through sharp discounting reduces profit margins, as would a price war, and will cause profits to fall.
This includes the use of predatory pricing toward smaller competitors.

Price war

price competitionfare warcompete on price
In the short term, predatory pricing through sharp discounting reduces profit margins, as would a price war, and will cause profits to fall. However, it can be difficult to prove that prices dropped because of deliberate predatory pricing, rather than legitimate price competition.

Supracompetitive pricing

Supra competitive pricingsupracompetitivesupra-competitive prices
After the weaker competitors are driven out, the surviving business can raise prices above competitive levels (to supra competitive pricing).
Supracompetitive pricing may also result following a period of predatory pricing, which has potential antitrust implications for the predator.

Loss leader

loss-leaderloss leadersLoss-leading
Predatory pricing, also known as undercutting, is a pricing strategy in which a product or service is set at a very low price with the intention to achieve new customers (Loss leader), or driving competitors out of the market or to create barriers to entry for potential new competitors.

Competition Act 1998

Competition Act
Section 18(1) of the Competition Act 1998 prohibits the abuse of a dominant position by 'one or more undertakings ... if it may affect trade within the United Kingdom’.
predatory pricing, excessive prices, refusal to supply, vertical restraints and price discrimination to maximise profit, gain competitive advantage or otherwise restrict competition.

Anti-competitive practices

anti-competitiveanticompetitiveanti-competitive behavior
Predatory pricing is considered anti-competitive in many jurisdictions and is illegal under some competition laws.

Competition law

antitrustantitrust lawanti-trust
Predatory pricing is considered anti-competitive in many jurisdictions and is illegal under some competition laws.
A more tricky issue is predatory pricing.

Dumping (pricing policy)

dumpinganti-dumpingantidumping
The use of predatory pricing to capture a market in one territory while maintaining high prices in the suppliers' home market (also known as "dumping") creates a risk that the loss-making product will find its way back to the home market and drive down prices there.

Herbert Henry Dow

Herbert H. DowHerbert DowDowmetal
But Dow's founder Herbert Dow simply purchased the cheap German product and sold it back to Europe at a profit.
Unable to compete with this predatory pricing in the U.S., Dow instructed his agents to buy up hundreds of thousands of pounds of the German bromine locally at the low price.

Pricing strategies

pricing strategypricepricing
Predatory pricing, also known as undercutting, is a pricing strategy in which a product or service is set at a very low price with the intention to achieve new customers (Loss leader), or driving competitors out of the market or to create barriers to entry for potential new competitors.

Market (economics)

marketmarketsmarket forces
Predatory pricing, also known as undercutting, is a pricing strategy in which a product or service is set at a very low price with the intention to achieve new customers (Loss leader), or driving competitors out of the market or to create barriers to entry for potential new competitors.

De facto

de facto relationshipde-factode facto'' segregation
The so-called predatory merchant then theoretically has fewer competitors or even is a de facto monopoly.

Discounting

discount factordiscounteddiscount
In the short term, predatory pricing through sharp discounting reduces profit margins, as would a price war, and will cause profits to fall.

Revenue

turnoverrevenuesgross revenue
Competitors who are not as financially stable or strong may suffer even greater loss of revenue or reduced profits.

Profit (accounting)

profitprofitsprofitability
Competitors who are not as financially stable or strong may suffer even greater loss of revenue or reduced profits.

Dow Chemical Company

Dow ChemicalDowThe Dow Chemical Company
For example, when Dow Chemical exported competitively-priced bromine to Europe, the established German bromine cartel attempted to punish them by selling bromine in the US at half price (below manufacturing cost), which would prevent Dow from making any profit in the US.

Bromine

Brbrominatedbromo
For example, when Dow Chemical exported competitively-priced bromine to Europe, the established German bromine cartel attempted to punish them by selling bromine in the US at half price (below manufacturing cost), which would prevent Dow from making any profit in the US.

Cartel

cartelsprice fixing cartelTrusts
For example, when Dow Chemical exported competitively-priced bromine to Europe, the established German bromine cartel attempted to punish them by selling bromine in the US at half price (below manufacturing cost), which would prevent Dow from making any profit in the US.

William Baumol

William J. BaumolBaumolBaumol, William J.
William Baumol proposed a long-term rule, seeking to avoid full reliance on cost-based tests.

Barnaby Joyce

The amendments, labelled the 'Birdsville Amendments' after Senator Barnaby Joyce, penned the idea in s46 to define the practice more liberally than other behaviour by requiring the business first to have a 'substantial share of a market' (rather than substantial market power).

Competition Act

Section 50 of the Competition Act, which criminalized predatory pricing, has been repealed and replaced by sections 78 and 79, which deal with the matters civilly.