What is Predatory Price? A Comprehensive Legal Overview

Q: Is predatory pricing legal?

No, it is considered an anti-competitive practice and is illegal under U.S. antitrust laws.

Q: How can I prove predatory pricing?

Proving predatory pricing requires evidence of pricing below cost and intent to harm competition.

Definition & Meaning

Predatory pricing refers to a pricing strategy where a business sets its prices extremely low, often below its costs, with the intent to eliminate competition. This practice is considered anti-competitive and is illegal under U.S. antitrust laws. The goal of predatory pricing is to drive competitors out of the market or prevent new entrants, allowing the predator to raise prices later once competition has been diminished.

Table of content

Legal Use & context

Predatory pricing is primarily addressed in the context of antitrust law, which governs competition among businesses. It is relevant in civil cases where companies may bring lawsuits against competitors for unfair practices. Legal professionals often analyze pricing strategies to determine if they violate antitrust regulations. Users can manage some legal aspects of predatory pricing disputes through forms and templates available from US Legal Forms.

Key legal elements

Real-world examples

Here are a couple of examples of abatement:

Example 1: A large retail chain sells a popular product at a price significantly lower than its cost to drive a smaller competitor out of business. Once the competitor is gone, the retail chain raises prices again.

Example 2: A tech company introduces a new software at a price that is not sustainable for its production costs, aiming to eliminate a rival software provider from the market. (hypothetical example)

Relevant laws & statutes

The primary legal framework addressing predatory pricing in the United States includes:

The Sherman Antitrust Act
The Clayton Antitrust Act
Federal Trade Commission Act

State-by-state differences

Examples of state differences (not exhaustive):

State	Legal Considerations
California	Enforces strict antitrust laws and has specific regulations against predatory pricing.
Texas	Follows federal antitrust laws but has additional state provisions that may apply.
New York	Has robust antitrust enforcement and specific guidelines for pricing practices.

This is not a complete list. State laws vary, and users should consult local rules for specific guidance.

Comparison with related terms

Term	Definition	Difference
Price Discrimination	Charging different prices to different customers for the same product.	Price discrimination involves varying prices based on customer segments, not necessarily below cost.
Monopolization	The act of acquiring or maintaining monopoly power through anti-competitive practices.	Monopolization can include predatory pricing but encompasses broader anti-competitive behaviors.

Common misunderstandings

What to do if this term applies to you

If you suspect that a competitor is engaging in predatory pricing, consider the following steps:

Document instances of pricing below cost and any communications that suggest intent to harm competition.
Consult with a legal professional specializing in antitrust law for guidance on your situation.
Explore US Legal Forms for templates that can help you file a complaint or take other legal actions.

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Quick facts

Typical fees: Legal fees can vary widely based on the complexity of the case.
Jurisdiction: Federal and state courts handle antitrust cases.
Possible penalties: Companies found guilty of predatory pricing may face fines and be required to change their pricing strategies.

Key takeaways

Frequently asked questions

What is predatory pricing?

Predatory pricing is a strategy where a business sets prices below costs to eliminate competitors.