Enforce and Strengthen Bans on Predatory Pricing

Predatory pricing — when a company intentionally prices a product below cost to harm competition and drive rivals out of an industry — has been a longstanding monopolistic tactic. To end predatory pricing abuses, state and federal officials can take steps to clarify the law and enforce predatory pricing bans already on the books. 

When the Supreme Court broke up the Standard Oil monopoly, it was, in part, because the company consistently priced its products below cost whenever a smaller rival challenged its territory. The evidence of Standard Oil’s predatory pricing led Congress and the courts to view predatory pricing as a core, if not the primary, tool powerful firms use to unfairly dominate markets. Antitrust laws passed in the wake of the Standard Oil case, including the Clayton Act and the Robinson-Patman Act, as well as numerous Supreme Court decisions, made clear that predatory pricing violated the law.

Despite clear democratic intent to stop it, by the 1980s, federal judges — aligned with lawyers and economists associated with the pro-monopoly Chicago School of antitrust — had begun to view predatory pricing with increasing skepticism, questioning whether it actually harmed competition. The Supreme Court’s 1993 decision in Brooke Group cemented this view. It requires plaintiffs to prove that a company priced a product below cost for a sustained period and that it was very likely to recoup those losses by raising prices to monopoly levels after it had driven rivals from the market. As a result, “antitrust claims alleging a predatory price cut have fallen into disuse” since Brooke Group, according to scholars C. Scott Hemphill and Philip Weiser.

The high bar the Supreme Court set in its Brooke Group decision betrays reality. Large, multi-product, multi-location companies can price one product well below cost over the long term, subsidizing those losses through higher-priced products, fluctuating prices, or external financing not available to most small companies. Smaller firms cannot reasonably compete, even if they offer superior products or services, if dominant, well-financed, multi-product companies can simply price some of their goods and services below cost without end. This allows powerful firms to crush rivals and build monopolies without fear of antitrust enforcement.

Amazon has fueled its monopoly flywheel, in part, with predatory pricing. For example, it lost $3 billion selling books below cost over its first six years, then began selling diapers at a loss of $200 million a month in order to force the parent company of Diapers.com, Quidsi, into a merger. It has deployed a similar strategy selling books below cost to push out brick-and-mortar booksellers and did the same with Zappos.com to force a merger.

What Federal Lawmakers and Enforcers Can Do to Reinvigorate Predatory Pricing Enforcement

• Amend the law to once again ban predatory pricing. Federal lawmakers can take clear action to undo current pro-monopoly case law that has all but eliminated predatory pricing enforcement. Through either amendment to the federal Sherman Act or a separate bill, lawmakers can make clear that recoupment is not required for predatory pricing to be an effective monopoly tactic, particularly when undertaken by a multi-product conglomerate or by an already dominant company with significant financial advantages over its rivals.
• Offer predatory pricing guidelines for courts and businesses. As with the federal merger guidelines, the Federal Trade Commission and the Department of Justice’s Antitrust Division can issue guidance to courts and the business community clarifying that predatory pricing can harm competition even absent a realistic prospect of recoupment through high prices, as currently required under Brooke Group.
• Bring novel cases relying on current case law. While predatory pricing claims are difficult under the Brooke Group standard, a select few lawsuits have survived motions to dismiss, with facts that fit current legal standards. One recent case, SC Innovations v. Uber Technologies, accused Uber of pricing rides below cost and overpaying drivers to force smaller rideshare rivals out of certain cities. The judge in that lawsuit found that Uber was likely to raise prices after driving its rivals from the market and that there were high barriers to entering the ride-hailing market, killing Uber’s attempt to dismiss the lawsuit. The case ultimately settled before trial.

What State Lawmakers and Enforcers Can Do to End Predatory Pricing

• Enforce state laws against predatory pricing. Laws in at least eight states ban predatory pricing outright: Arkansas, Kentucky, Montana, Nebraska, Pennsylvania, Tennessee, Vermont, and Wyoming. Vermont and Pennsylvania do not ban illegal monopolization under state law — indeed, Pennsylvania has no formal antitrust law at all — so predatory pricing bans can serve as a prohibition on one specific kind of monopoly conduct. Although some of these laws remain relatively untested in court, they all ban below-cost pricing with the aim to drive out competition, and often do so using plain language that is easily understandable and enforceable.
• Use unfair methods of competition laws to challenge predatory price cutting. Twenty-two states have laws prohibiting “unfair methods of competition” — a broad term that bans conduct harmful to competition but doesn’t always fit neatly into traditional antitrust laws that ban price fixing and illegal monopolization. Despite the difficult federal precedent set by the Brooke Group decision, states can use their unfair methods of competition laws to challenge predatory pricing practices. For example, California’s Unfair Practices Act has been used to prosecute predatory pricing schemes, and state courts have continued to uphold the law’s ability to address predatory pricing despite evolving federal case law.

ILSR Resources:

• Stacy Mitchell, Testimony during the Federal Trade Commission workshop, “Competition Snuffed Out: How Predatory Pricing Harms Competition, Consumers, and Innovation,” January 2025.
  
• Stacy Mitchell, Comments to U.S. House of Representatives Committee on the Judiciary Subcommittee on Antitrust, Commercial and Administrative Law Investigation into Competition in Digital Markets, May 2020.
  
• Ron Knox, “Handcuffed By the Courts: How Judges Broke Our Monopoly Laws and What Congress Must Do to Repair Them,” ILSR, March 2022. 

External Resources:

• The full transcript of the Federal Trade Commission’s workshop on predatory pricing, January 2025.
  
• Lina Khan, “Amazon’s Antitrust Paradox,” (detailing how Amazon engages in predatory pricing), Yale Law Journal, 2017.
  
• C. Scott Hemphill and Philip Weiser, “Beyond Brooke Group: Bringing Reality t oup: Bringing Reality to the Law of Predatory Pricing,” Yale Law Journal, 2018.