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Originally Posted by bucky60 |
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https://www.ftc.gov/tips-advice/comp...-or-below-cost
"Instances of a large firm using low prices to drive smaller competitors out of the market in hopes of raising prices after they leave"
Are you saying Madden wasn't well established and NFL2K wasn't an upstart?
Not according to the Federal Trade Commission
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I believe there is a little more to it as I pointed out in the definition and explanation in my previous post.. Sega was hardly an upstart. The lower price would also have to be maintained over time. EA settled a lawsuit in 2012(?) due to something similar with an increase in product price with Madden, which I believe may have stemmed from their price drop to $29.95???...
Market share determines dominance. I do not know the market share for 2005 between the two companies.
But I will leave with this - In review of my initial post, I should have phrased my comment better. I did very much leave my comment in a manner that was not as true to what I was thinking when I did create the comment. Legally, was Sega going to see a lawsuit? I don't know and since the game was stopped after 2005, it doesn't matter now.
The pricing choice is questionable, IMO. I would like to see the costs and other financials. Could Sega take down EA? Probably not...But the tactic was very much within the frame work, being its extremely low price, of being predatory.
The FTC page is a rather limited explanation.. (EDIT: from justice.gov) key word: potential rival
In most general terms predatory pricing is defined in economic terms as a price reduction that is profitable only because of the added market power the predator gains from eliminating, disciplining or otherwise inhibiting the competitive conduct of a rival or potential rival. Stated more precisely, a predatory price is a price that is profit maximizing only because of its exclusionary or other anticompetitive effects.3 The anticompetitive effects of predatory pricing are higher prices and reduced output (including reduced innovation), achieved through the exclusion of a rival or potential rival. But such a definition does not state an operational legal rule.5 It is therefore necessary to base the legal rule on tractable measures such as cost, market structure, and recoupment.
A key premise in developing an enforcement policy for predatory pricing is the expected frequency and severity of its occurrence. That determination necessarily rests on the twin guides of empirical evidence and economic theory. In Matsu****a and Brooke the Supreme Court found that predatory pricing was speculative and “inherently uncertain,”5 and noted its “general implausibility.”6 Moreover, in Matsu****a the Court embraced the view that a “consensus” of commentators finds that predatory pricing is “rarely tried, and even more rarely successful,”7 and other courts have embraced this view,8 including a later Supreme Court in the Brooke decision.9 The consensus to which the Court referred rested essentially on empirical studies by John McGee and Roland Koller, published in 1958 and 1969;10 and the Court cited each work explicitly.11
https://www.justice.gov/atr/predator...egal-policy#26