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Does below cost only apply for selling certain types of 1-off physical goods? A lot of online apps tend to operate at a loss to gain a large audience and then

by nickjj 3y ago

Does below cost only apply for selling certain types of 1-off physical goods? A lot of online apps tend to operate at a loss to gain a large audience and then once they've gained market share they often increase fees or more generally make it more expensive for users. Their business model forces smaller competitors out because a larger funded company can in theory hold out for a longer period of time at a loss. It's surprising this is ok but selling a piece of hardware at a loss is not ok. What about Costco selling rotisserie chickens at a loss to get people in the store or the idea of a "loss leader"?

Jensson 3y ago
Not sure, but I think arguments like is why this lawsuit took so much time. For simpler goods and smaller scale "below cost" to hurt competition is very easy to prove, but when Intel did that for the entirety of Europe and their massive process it was apparently easy for Intel to hide what they did. > What about Costco selling rotisserie chickens at a loss to get people in the store or the idea of a "loss leader"? Isn't the usual argument that they got surplus stock in some way? Then it isn't below cost, it is loss minimization from a bad investment, and it doesn't hurt competition for chicken since it is a limited amount of time.
- brewdad 3y ago
  Whether you have 100 chickens or 100 million, if they cost you $6 and you sell them for $5, that's below cost. Also, it isn't limited amount of time. This has been Costco's MO for decades.
  - Jensson 3y ago
    > Also, it isn't limited amount of time. This has been Costco's MO for decades. Have they sold chicken at below cost for decades with no stop? Really? I think you mean they have sold small portions of their wares at below cost, not that they have sold a specific thing at below cost for extended amounts of time. > Whether you have 100 chickens or 100 million, if they cost you $6 and you sell them for $5, that's below cost. Yeah, but the store as a whole isn't selling at below cost, and on average since those chickens aren't sold at below cost all the time they still make money from chickens. Those things means that on average the store is net positive, and them selling chickens is a net positive. Hence overall they don't sell anything at a net loss, its just for short periods of time they do it and those can be hand waved away. There are a lot of laws surrounding limited time offers that they have to follow.

by nickjj 3y ago

Jensson 3y ago

Not sure, but I think arguments like is why this lawsuit took so much time. For simpler goods and smaller scale "below cost" to hurt competition is very easy to prove, but when Intel did that for the entirety of Europe and their massive process it was apparently easy for Intel to hide what they did. > What about Costco selling rotisserie chickens at a loss to get people in the store or the idea of a "loss leader"? Isn't the usual argument that they got surplus stock in some way? Then it isn't below cost, it is loss minimization from a bad investment, and it doesn't hurt competition for chicken since it is a limited amount of time.

brewdad 3y ago
Whether you have 100 chickens or 100 million, if they cost you $6 and you sell them for $5, that's below cost. Also, it isn't limited amount of time. This has been Costco's MO for decades.
- Jensson 3y ago
  > Also, it isn't limited amount of time. This has been Costco's MO for decades. Have they sold chicken at below cost for decades with no stop? Really? I think you mean they have sold small portions of their wares at below cost, not that they have sold a specific thing at below cost for extended amounts of time. > Whether you have 100 chickens or 100 million, if they cost you $6 and you sell them for $5, that's below cost. Yeah, but the store as a whole isn't selling at below cost, and on average since those chickens aren't sold at below cost all the time they still make money from chickens. Those things means that on average the store is net positive, and them selling chickens is a net positive. Hence overall they don't sell anything at a net loss, its just for short periods of time they do it and those can be hand waved away. There are a lot of laws surrounding limited time offers that they have to follow.