In business and economics, predatory pricing is the practice of selling a product or service at a very low price, intending to drive competitors out of the market, or create barriers for entry by potential new competitors. In the Philippines, or in the crap that Nestle Philippines pulls, it’s the distributors who are the victims of this nefarious practice.
Distributors cannot sustain equal or lower prices without losing money, they go out of business or choose not to enter the business. Nestle is able to meet its quota while leaving its distributors losing money or worse borrowing money just to keep its business afloat. It’s a vicious cycle and they can hardly raise prices above what the market would otherwise bear.
In many countries predatory pricing is considered anti-competitive and is illegal under anti-trust laws. It is usually difficult to prove that prices dropped because of deliberate predatory pricing rather than legitimate price competition. In any case, competitors may be driven out of the market before the case is ever heard.
In the short term predatory pricing through sharp discounting reduces profit margins, as would a price war and will cause profits to fall.
The only winner is that bird on the damned nest.
That is why the Department of Trade and Industry should step in. Down with these multinational buggers!
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