The Economics of Sales Below Cost Laws

Over the three decades, courts have drastically limited the viability of predatory pricing claims under the federal antitrust laws. With the federal courts' modern approach to evaluating predatory pricing claims, state laws prohibiting sales below cost create an alternative method for firms to legally prevent sales that may be predatory. This book examines the legal history of sales below cost laws and predatory pricing under the federal antitrust laws. It then evaluates how these laws differ in application and a firm's incentives arising from state legislation preventing below cost sales. If the laws are effective and pricing below cost is a legitimate concern, this legislation should protect small businesses in various retail industries. Empirical tests are performed to examine if the laws are effective in protecting small businesses from either predatory pricing or loss leader selling. This analysis should help in understanding the impact of these state laws on small businesses and should be particularly useful to professionals in Legal or Economics fields, or anyone that maintains an interest in antitrust issues or public policy.