New Vending gained these lost sales from KowloonVend. When it entered the market, New Vending began selling its machines at a much lower price and KowloonVend’s market share began to decline. KowloonVend was selling its machines at a highly profitable price. KowloonVend has the majority of vending machine sales, while New Vending, a recent entrant in the market, has a much smaller share. KowloonVend Ltd and New Vending Co are the only two companies that sell vending machines in Hong Kong. In this scenario, consumers will ultimately be worse off due to weakened competition leading to higher prices and reduced product quality and choice. In the short run, the undertaking with substantial market power which set the below-cost prices may incur losses however, in the long run, it would be able to charge higher, supra-competitive prices once it has forced other competitors out of the market. Generally speaking, an adverse effect on competition will arise where there is or likely to be anti-competitive foreclosure of existing competitors or new entrants. How could predatory pricing harm competition? However, if an undertaking with substantial market power sets prices so low that it deliberately foregoes profits in order to force one or more other competitors out of the market, this may amount to predatory pricing.
Offering low prices to consumers for example by giving out discounts, cutting costs and otherwise competing on prices is the epitome of competitive conduct. Predatory pricing What is predatory pricing?
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