What is Predatory Pricing?
Predatory Pricing is the act of temporarily lowering product prices in order to eliminate existing or potential competition. This might involve giving away freebies or setting prices at a loss – you could think of it as temporary business suicide, only a typical business that commits predatory pricing will have the means to easily survive the losses with little after effects. After driving out the competition, the surviving will then increase their prices again – in some cases even higher than before – to make up for their losses.
Predatory pricing is regarded as anti-competitive and is illegal in many countries. Unfortunately, predatory pricing cases can be difficult to prove and are often thwarted far too late for many of the victims of the competitor. Predatory pricing results in much fewer competitors or even monopoly effects.
Predatory pricing cases
One of the most famous offenders of predatory pricing is Wal-Mart. This mammoth chain of superstores has had clashes with the law on multiple occasions due to it’s aggressive pricing strategies. In Germany, Wal-Mart has been ordered by the government to increase it’s prices, while in America, it was forced to increase the price of contraception pills from $9 to $26.88. Another example: Online giant Amazon.com has been ordered to stop offering free shipping on products in France. Interestingly, Amazon have refused to adhere to the French laws, and have instead stubbornly opted to pay a daily 1000 Euro fine to the government instead.
Is price tracking related repricing regarded as predatory?
Tracking prices online with The Repricing Company is all part of a healthy competitive pricing strategy. Staying on top of the latest pricing trends and repricing products accordingly all helps to stay in the game and keep one step ahead of your competition. Competitive repricing only becomes illegal and aggressive when you are setting prices to damage others rather than simply benefit your own online business.