Predatory pricing is the practice of using below-cost pricing to undercut competitors and establish an unfair market advantage.Predatory pricing is a method in which a seller sets a price so low that other suppliers cannot compete and are forced to exit the market. For example, in Canada, those that are engaged in predatory pricing face a monetary penalty. While predatory pricing has some short-term positive effects—such as ultra-low prices for customers, for a brief time—it ultimately does serious harm to the state of the market. That said, it is not a violation of the law if a business sets prices below its own costs for reasons other than having a specific strategy to eliminate competitors. Practicing predatory price cutting can infringe on competition laws and competitive regulations put in place by the US supreme court. A company that does this will see initial losses, but eventually, it benefits by driving competitors out of the market and raising its prices again. A. On the one hand, history and economic theory teach that predatory pricing can be an instrument of abuse, but on the other side, price reductions are the hallmark of competition, and the tangible benefit that consumers perhaps most desire from the economic system. Some practices are unethical but not considered as illegal. 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. Predatory pricing generally means one competitor lowering the prices of the product at the very beginning to attract customers. A commission, formed to investigate their activities, called Busways’ actions “predatory, deplorable and against the public interest.”DTC indeed was put out of business, and Busways was then acquired by an even larger company, Stagecoach. Set by the government, a price floor is the lowest price that goods or commodities can be legally sold at based on the minimum cost at which turning a profit is still possible. Predatory pricing The traditional theory of predatory pricing is straightforward. After successfully driving out competitors, predators reach a dominant position … They also might benefit from aggressive competition in the market, if competitors are able to hold their ground, with higher-quality products and services as companies are motivated to establish an advantage over competitors. There is a story in South Korea about how a small corner shop beat a large supermarket chain at its own game. However, allegations of this practice can be difficult to prosecute because defendants may argue successfully that lowering prices are part of normal competition, rather than a deliberate attempt to undermine the marketplace. The company employing predatory pricing will run initially at a loss. dumping into the U.S. by a German cartel that controlled the European market for bromine. This prohibition stands for companies who engage in predatory pricing but cannot, or ever hope, to recoup the losses made through this conduct. Since this is the purpose of predatory pricing, it is banned in many places because it is considered a violation of competition laws. In India, as per the Competition Act, 2002 disregards the predatory pricing strategy under Section 4. “Predatory pricing is a deliberate strategy of driving competitors out of the market by setting very low prices or selling below AVC.” “Once existing firms have been driven out and entry of new firms deterred it can raise price.” Key evaluation: Predatory pricing is illegal under the competition laws of most countries but is very difficult to prove. In September, Wal-Mart was hit with three separate charges of predatory pricing. At some point, businesses that practice predatory pricing will have to continue charging higher prices as they were before, which puts their dominant position as a price leader in jeopardy. Under such conditions, prices are likely to rise sharply to compensate for the initial period of short-term loss. To Kohn, the company is monopsony engaged in "predatory pricing." A franchised monopoly refers to a company that is sheltered from competition by virtue of an exclusive license or patent granted by the government. § 2. A monopolistic marketplace might allow the company that holds the monopoly to raise prices as they wish, perhaps reducing consumer choice in the bargain. If pricing is set lower by a business for reasons other than to eliminate competitors, then pricing is not considered predatory. Although everyone is aware of the predatory pricing, it becomes very difficult to prove that the act was deliberate attempt and thus finds a lot of leeway in the court of law. 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