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Took me 30 seconds on the FTC website to find it: https://www.ftc.gov/tips-advice/competition-guidance/guide-antitrust-laws/single-firm-conduct/predatory-or-bel

Took me 30 seconds on the FTC website to find it: https://www.ftc.gov/tips-advice/competition-guidance/guide-antitrust-laws/single-firm-conduct/predatory-or-below-cost https://www.ftc.gov/tips-advice/competition-guidance/guide-a... Can prices ever be "too low?" The short answer is yes, but not very often. Generally, low prices benefit consumers. Consumers are harmed only if below-cost pricing allows a dominant competitor to knock its rivals out of the market and then raise prices to above-market levels for a substantial time. A firm's independent decision to reduce prices to a level below its own costs does not necessarily injure competition, and, in fact, may simply reflect particularly vigorous competition. Instances of a large firm using low prices to drive smaller competitors out of the market in hopes of raising prices after they leave are rare. This strategy can only be successful if the short-run losses from pricing below cost will be made up for by much higher prices over a longer period of time after competitors leave the market. Although the FTC examines claims of predatory pricing carefully, courts, including the Supreme Court, have been skeptical of such claims. IANAL, but I'd be very interested in hearing a lawyer's take on this.

antiviral 10y ago
From the same FTC page: Pricing below your own costs is also not a violation of the law unless it is part of a strategy to eliminate competitors, and when that strategy has a dangerous probability of creating a monopoly for the discounting firm so that it can raise prices far into the future and recoup its losses. In markets with a large number of sellers, such as gasoline retailing, it is unlikely that one company could price below cost long enough to drive out a significant number of rivals and attain a dominant position
- ThrustVectoring 10y ago
  And it's not clear that Uber's strategy is to eliminate competitors, rather than engaging in a scheme to turn investment money into "growth" for raising further investment.
- guiambros 10y ago
  The key part is "...has a dangerous probability of creating a monopoly for the discounting firm". That's not the case here. I don't see Uber creating a monopoly in any way. If they raise prices to unreasonable levels (i.e., more than people used to pay for regular cabs), people will go to Lyft, Juno, or the next ride-hailing startup. If there's no competitor remaining, new ones will show up. Or regular cabs will be back. IMO, the endgame for Uber is not to raise prices; it is to reduce costs. They're betting the farm on driverless cars. Not too different than Amazon with retail. Amazon doesn't need to charge more than the local retailers they've put out of business; they just need to have a lower cost structure.
  - antiviral 10y ago
    Amazon had a structural advantage built into their more efficient online operations vs. a traditional brick and mortar store. Regarding your point about probability of creating a monopoly: "Brishen Rogers, an associate professor at Temple University’s Beasley School of Law who has studied Uber’s effects on the taxi market, said traditional cab companies are clearly threatened by newer competitors, and he expects many more will go out of business as a result. [Many] lenders, including Citibank, expressed concerns about the effects that “nontraditional ride-sharing companies” would have on the city’s traditional medallion-based business model. " http://www.wsj.com/articles/san-franciscos-biggest-taxi-operator-seeks-bankruptcy-protection-1453677177 http://www.wsj.com/articles/san-franciscos-biggest-taxi-oper...
    - dx034 10y ago
      Traditional taxis are threatened by new competitors, but the plural here is important. It's not just Uber, it's Uber, Lyft, and all the others that can come up. Here in London we already have a large number of minicab companies. Uber is very successful because they're cheapest. But as soon as they'd raise prices someone else will take the crown. Developing a basic app for taxis (calling a cab, paying, ETA) will probably not cost more than a few millions. Getting people to drive for you (in addition to other companies) is also very easy at the moment. That makes barriers to entry extremely low in the market. It's not an Amazon with huge warehouses and not a Google with a highly sophisticated search algorithm. Uber just competes by price, they have no real technical advantage here.
sjg007 10y ago
I think the argument would be drawn from regular rates vs surge pricing vs taxi rates (and cost due to traffic etc...)

antiviral 10y ago

From the same FTC page: Pricing below your own costs is also not a violation of the law unless it is part of a strategy to eliminate competitors, and when that strategy has a dangerous probability of creating a monopoly for the discounting firm so that it can raise prices far into the future and recoup its losses. In markets with a large number of sellers, such as gasoline retailing, it is unlikely that one company could price below cost long enough to drive out a significant number of rivals and attain a dominant position

ThrustVectoring 10y ago
And it's not clear that Uber's strategy is to eliminate competitors, rather than engaging in a scheme to turn investment money into "growth" for raising further investment.
guiambros 10y ago
The key part is "...has a dangerous probability of creating a monopoly for the discounting firm". That's not the case here. I don't see Uber creating a monopoly in any way. If they raise prices to unreasonable levels (i.e., more than people used to pay for regular cabs), people will go to Lyft, Juno, or the next ride-hailing startup. If there's no competitor remaining, new ones will show up. Or regular cabs will be back. IMO, the endgame for Uber is not to raise prices; it is to reduce costs. They're betting the farm on driverless cars. Not too different than Amazon with retail. Amazon doesn't need to charge more than the local retailers they've put out of business; they just need to have a lower cost structure.
- antiviral 10y ago
  Amazon had a structural advantage built into their more efficient online operations vs. a traditional brick and mortar store. Regarding your point about probability of creating a monopoly: "Brishen Rogers, an associate professor at Temple University’s Beasley School of Law who has studied Uber’s effects on the taxi market, said traditional cab companies are clearly threatened by newer competitors, and he expects many more will go out of business as a result. [Many] lenders, including Citibank, expressed concerns about the effects that “nontraditional ride-sharing companies” would have on the city’s traditional medallion-based business model. " http://www.wsj.com/articles/san-franciscos-biggest-taxi-operator-seeks-bankruptcy-protection-1453677177 http://www.wsj.com/articles/san-franciscos-biggest-taxi-oper...
  - dx034 10y ago
    Traditional taxis are threatened by new competitors, but the plural here is important. It's not just Uber, it's Uber, Lyft, and all the others that can come up. Here in London we already have a large number of minicab companies. Uber is very successful because they're cheapest. But as soon as they'd raise prices someone else will take the crown. Developing a basic app for taxis (calling a cab, paying, ETA) will probably not cost more than a few millions. Getting people to drive for you (in addition to other companies) is also very easy at the moment. That makes barriers to entry extremely low in the market. It's not an Amazon with huge warehouses and not a Google with a highly sophisticated search algorithm. Uber just competes by price, they have no real technical advantage here.

sjg007 10y ago

I think the argument would be drawn from regular rates vs surge pricing vs taxi rates (and cost due to traffic etc...)