Predatory Pricing: Any Price That's Better Than Mine
from the it-used-to-be-called-competitive-pricing dept
Amidst the endless discussion about Google Checkout, some are trotting out predatory pricing accusations because the company is willing to take a loss on each transaction in order to drive advertising sales. But does this qualify as predatory, or is this the standard definition of a loss leader? Is the iTunes music store predatory because it runs at a loss with the goal of fueling iPod sales? Are Linux distros predatory because they offer free software in hopes of collecting service revenue later on? What about news sites giving free access so they can sell ads? Unfortunately, there's no good definition of predatory pricing, or a bright line separating it from normal competitive pricing. There's nothing intrinsically nefarious about wanting to price the competition out of business. What people are concerned about is the hypothetical case in which a company drives the competition out of business, and then raises prices dramatically. But this is rare, and assumes that new entrants couldn't then enter the space. As in the case of similar complaints against Microsoft, the solution is to compete aggressively with the predator by out innovating, which is how monopolists are eventually brought down.