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Understanding how businesses may use illegal pricing

On Behalf of | Mar 10, 2023 | Class Actions

Federal and state business laws regulate the way companies compete with each other to help ensure a fair market. Efforts to drive competitors out of a market and create a monopoly may motivate consumers to back a class action lawsuit. Illegal pricing practices could be evidence of anti-competitive actions.

Since an unfair pricing system deprives the public of the ability to find products at reasonable prices, it is important to understand how a business can attempt to monopolize a market.

Predatory pricing

According to the Federal Trade Commission, it is possible for a business to lower its prices in such a way that it damages competitors. This practice, known as predatory pricing, targets competitors by forcing them to reduce their prices to low amounts that make it impossible to generate a profit.

The goal of price fixing is to force the other competitors to abandon the market. This leaves the dominating company free to raise prices sharply, which means consumers must buy the product from the remaining business at its high price.

Price fixing

Sometimes rival businesses collude to maintain a high price for a common product they all offer. Price fixing is a form of monopolization that leaves consumers no way to find a certain product for a lower price since all the sellers are offering it for a similar amount.

Even if it seems difficult to prove predatory pricing or price fixing, these practices may indicate other anti-competitive practices. For example, price fixing usually happens because of a conspiracy to commit a crime, which is also illegal. Understanding all the criminal offenses involved could form the basis of a successful class action suit.

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