Is it illegal to sell product at a loss?

Is it illegal to sell product at a loss?

What statute is at issue? California Business & Professions Code section 17043 prohibits “sell[ing] any article or product at less than the cost thereof to [a] vendor, or . . . California law also expressly prohibits the use of loss leaders.

What is the rule against predatory pricing?

Predatory pricing is the illegal act of setting prices low to attempt to eliminate the competition. Predatory pricing violates antitrust laws, as it makes markets more vulnerable to a monopoly.

Is predatory pricing legal?

American antitrust laws exist to preserve competition in the market and minimize monopoly power, and according to those laws, most forms of predatory pricing are illegal. A pricing strategy is considered predatory if its goal is to price competitors out of the market.

Is it illegal to obtain competitors prices?

Generally, the antitrust laws require that each company establish prices and other terms on its own, without agreeing with a competitor. A plain agreement among competitors to fix prices is almost always illegal, whether prices are fixed at a minimum, maximum, or within some range.

When did predatory pricing become illegal?

U.S. antitrust law entered a new era in 1993, when the Supreme Court decided the Brooke case, the Court’s most important predatory pricing decision in modern times.

Is predatory pricing ethical?

Predatory pricing is pricing a product lower than the competition in the hopes of driving that competition out of business. Either way, it’s unethical in part because it is pricing to hurt competitors, not to help consumers.

Is predatory pricing unethical?

The concept is that a business that engages in predatory pricing could force its competitors to close and thus create a monopoly. Either way, it’s unethical in part because it is pricing to hurt competitors, not to help consumers.

How do you prove predatory pricing?

To prevail on a predatory-pricing claim, plaintiff must prove that (1) the prices were below an appropriate measure of defendant’s costs in the short term, and (2) defendant had a dangerous probability of recouping its investment in below-cost prices.

Is Leader pricing legal?

In recent years, loss leader pricing has been practiced with considerable success, especially by large national discount retailers. The strategy is not without its critics, however. Indeed, many states have passed laws that severely limit—or explicitly forbid—selling products below cost.

What is predatory pricing and is it illegal?

Predatory pricing is when a company sells goods below its own costs to eliminate competition and then raises prices once it has eliminated all of its competitors. Limit pricing is not illegal under antitrust laws because it does not harm consumers, while predatory pricing can be considered an unfair business practice.

What is “loss of control” type of predatory pricing?

The “loss of control” type of predatory pricing is where the predator can buy an asset (stock, plant, research project) at a below-market price in order to keep control over it. This lowers the potential profits to be made by the asset holders.

When do firms use predatory pricing to gain market share?

Firms sometimes use predatory pricing in order to gain a temporary market share to reap savings from their competitors. However, once the price war ends and the threat of losses ceases, the predator will likely be forced to reduce prices back to average variable cost as well.

What are the signs of predatory pricing?

A sign of predatory pricing can occur when the price of a product gradually becomes lower, which can happen during a price war. This is difficult to prove because it can be seen as a price competition and not a deliberate act. In the short term, a price war can be beneficial for consumers because of the lower prices.