BharatNotes Predatory Pricing
noun (uncountable)Usage in a UPSC answer
The CCI's investigation into Reliance Jio's zero-tariff introductory offer in 2016 raised foundational questions about the line between legitimately aggressive competition and predatory pricing designed to eliminate Airtel, Vodafone, and Idea from the market.
Synonyms
Antonyms
Word Family
predator (noun), predatory (adjective), predation (noun), prey (noun/verb)
Root
Latin praedator = plunderer, from praeda = prey, booty; prae- = before + -da (root related to catching)
Etymology
The legal concept of predatory pricing developed in American antitrust law in the late 19th century, flowing from Standard Oil-era concerns about below-cost pricing to eliminate competition. It was codified in the Sherman Act (1890) context and later the Areeda-Turner test (1975) set out the cost-based standard still widely used. India's Competition Act, 2002 adopts a dominance-plus-below-cost-or-exclusionary-intent standard.
Memory Hook
PREDATOR prices: like a lion stalking prey, the dominant firm hunts competitors by slashing prices below cost — once the rivals (prey) are eliminated, the predator raises prices and feasts on monopoly profits.
How This Word Works in UPSC Writing
Pricing below cost to drive competitors out, with the intention of raising prices once the market has been cleared. The analytical difficulty worth stating in GS3 is proof: low prices benefit consumers and are the ordinary result of competition, so distinguishing predation from efficiency requires showing both below-cost pricing and a realistic prospect of recouping the losses later. That two-part test is what regulators actually apply.
Don’t Confuse It With
Predatory pricing is below-cost pricing intended to eliminate rivals. Penetration pricing is temporary low pricing to enter a market, which is lawful. Dumping is exporting below normal value into another country and is addressed by trade remedies. Price discrimination charges different customers differently and is a separate concern.
Hindi Meaning
परभक्षी मूल्य निर्धारण (parabhakshī mūlya nirdhāran).
Common Questions
- What is predatory pricing?
- Setting prices below cost with the aim of driving competitors out of the market and raising prices once they have exited.
- Why is predatory pricing hard to prove?
- Because low prices are also the normal result of healthy competition, so a regulator must show both that pricing was below cost and that the firm could realistically recoup its losses later.
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