predatory pricing
Predatory pricing is an antitrust theory regarding a company’s use of below-cost prices to weaken or eliminate their competitors, with a sufficient likelihood that they can later recoup the resulting losses through higher, above-competitive prices after competition has been reduced. Low prices, and even some sales below cost, are not automatically unlawful because price cutting ordinarily benefits consumers and may result from legitimate competition.
Under federal antitrust law, predatory pricing can support a monopolization or attempted-monopolization claim under Section 2 of the Sherman Act and can also constitute primary-line competitive injury under the Robinson-Patman Act. In Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209 (1993), the U.S. Supreme Court identified two pricing-specific prerequisites: The challenged prices must be below an appropriate measure of the defendant's costs, and the defendant must have a sufficient likelihood of recouping its investment in below-cost pricing.
For a Sherman Act claim, the recoupment requirement is described as a “dangerous probability of recoupment” and for a primary-line Robinson-Patman Act claim, the requirement is a reasonable prospect of recoupment. The Supreme Court did not select one cost measure for every case. A plaintiff must also satisfy the other elements of the asserted antitrust claim.
Recoupment requires more than proof that a rival lost sales or left the market. The pricing must be capable of weakening competition and allowing the alleged offender to charge above-competitive prices long enough to recover the losses incurred during the low-price period. Courts therefore examine the duration and scale of the below-cost pricing, the structure of the relevant market, barriers to market entry, and whether the accused could later exercise market power. If market conditions would prevent the defendant from raising prices or sustaining those prices, recoupment is unlikely.
Predatory pricing should not be confused with every price difference between customers or every effort to win customers by offering lower prices. Evidence that a business wanted to defeat a competitor, without the required proof of below-cost pricing and recoupment, is not sufficient for a claim of predatory pricing.
[Last reviewed in August of 2026 by the Wex Definitions Team]
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