In news– Recently, the Competition Commission of India has dismissed allegations of predatory pricing against e-commerce platform Shopee.
About predatory pricing?
- Predatory pricing is a deliberate strategy, usually by a dominant firm, of driving competitors out of the market by setting very low prices or selling below the firm’s incremental costs of producing the output.
- The aim is that existing or potential competitors within the industry will be forced to leave the market, as they will be unable to effectively compete with the dominant firm without making a loss.
- Once the predator has successfully driven out existing competitors and deterred entry of new firms, it can raise prices and earn higher profits.
- It violates antitrust laws, as it makes markets more vulnerable to a monopoly.
- However, allegations of this practice can be difficult to prosecute because defendants may argue successfully that lowering prices is part of normal competition, rather than a deliberate attempt to undermine the marketplace.
- The difference between predatory pricing and competitive pricing is during the recouping phase of lost profits by the dominant firm charging higher prices.
- Predatory pricing usually will cause consumer harm and is considered anti-competitive in many jurisdictions making the practice illegal under some competition laws.