predatory pricing

Pricing policy designed to put competitors out of business. Large national companies can operate a differential pricing policy across the country, lowering prices below an economic level in areas where there is tough local competition. In order to cover their losses the company uses profits from areas where there is little, or no, competition. Once local competition is eradicated prices can be raised again. Companies operating a predatory pricing policy are likely to fall foul of restrictive trade practice legislation.