The Competition Assessment Of Predatory Pricing

Predatory pricing is a behaviour that abuse market dominant position, Its salient feature is price below cost predatory, such acts would undermine the market environment for fair competition and consumer interests, and thus become one of the main concern contents of competition law. In general, the incumbent rely on market dominance and financial power to lower its price below cost, because not all the competitors in the market can reduce the price to the same level, the competitor can not defeat the dominance company, the only way is to shut down their business. Therefore, the essence of predatory pricing is to exclude other competitors by creating loss.When assessing predatory pricing conduct, the core problem is to evaluate their price behavior. Predatory pricing bears the following elements:First, the company must have a dominant market position. If the incumbent do not have the dominant position would not rule out other competitors. As if it do not have a dominant position, then other companies will raise their production to compete with it. Therefore, the prerequisites for an enterprise to engaged in predatory pricing is to obtain a dominant market position; Secondly, price below cost. Enterprises fix their prices below cost, inevitably produces a loss, as more and more products were sold, the loss will increasing. according to market economy,everyone pursuits profits, therefore their motivation was doubted, the only reasonable explanation is to pursue monopoly profits; Third, exclusive effects on other competitors. The determination of predatory pricing behavior depends mainly upon the analysis of the production costs, since different types of enterprises bears different cost types, so different cost test must be apply to different situation. Because there are different competitors and the industry, the cost standard are not the same. Generally, price below the average avoidable cost would constitute predatory pricing. Price higher than the average avoidable cost, if exclusive effects of market competition and predatory intention was founded, it would constitute predatory pricing. Due to huge initial investment in certain industries, which requires a special measure test LAIC to examine the cost of the price standard of the industry.