What Is Predatory Pricing? Definition, Strategy, and Legal Implications

Learn what predatory pricing means, how it works, and why it's considered anti-competitive and sometimes illegal in business markets.

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Predatory pricing is a strategy where a company deliberately sets prices very low with the intent to drive competitors out of the market. Once competitors are eliminated, the company raises prices to recoup losses and gain higher profits. This practice is considered anti-competitive and can be illegal in some jurisdictions.

FAQs & Answers

  1. What is predatory pricing in business? Predatory pricing is a business strategy where a company sets prices extremely low to eliminate competitors and then raises prices later to maximize profits.
  2. Is predatory pricing illegal? Predatory pricing can be illegal in many jurisdictions as it is considered an anti-competitive practice designed to unfairly drive competitors out of the market.
  3. How does predatory pricing affect consumers? Initially, consumers may benefit from lower prices due to predatory pricing, but once competitors are eliminated, prices often increase, which can harm consumers in the long term.
  4. What are common examples of predatory pricing? Common examples include large companies lowering prices temporarily in certain markets to push smaller competitors out, then increasing prices after gaining market control.

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For a deeper understanding of market competition and pricing strategies, explore related topics such as price discrimination, competitive pricing, and antitrust laws to see how businesses navigate complex regulations.

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