Business Law (Predators Businesses Often Engage in Research Paper

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Business Law (predators

Businesses often engage in predatory practices to deter their competitors from entering their market niches or send their competitors out of business. Certain business ventures usually reduce their prices to destroy their rivals or worse still discourage new entry into the market. This happens regardless of the existence of the Sherman Act that was enacted to prohibit this predatory practice. The Sherman Act has largely been considered vague because of its inability to reign in firms that engage in predatory pricing vice (Areeda & Turner, 1975). Business ventures that engage in predatory pricing tend to draw a very vague line between legitimately competitive prices and prices that are utterly predatory. Businesses that engage in predatory pricing normally price their products below appropriate measure of cost with an intention of driving their financially weaker competitors out of business and establishing monopoly power. Courts have failed to address the issue of predatory pricing in context of the antitrust laws (Oster & Strong, 2001). There are no standards that address cost/price test. The antitrust laws have failed to come up with standards that hold prices below average variable cost as predatory.

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There is more to predatory pricing that is not known as it also involves intertemporal behavior patterns that cannot be adequately addressed by comparison of prices and costs. It is a strategic behavior with intertemporal undertones (Oster & Strong, 2001). Those engaging in predatory pricing do not incur losses in standard accounting sense. He incurs lower profits. The predator incurs economic losses as opposed to accounting losses.

Other than predatory pricing, there are also other predatory practices like the predatory lending that is very prevalent in mortgage lending in Hispanic communities. Predatory lenders thrive in subprime market in Latino communities where subprime mortgage grew by 26% in from 1994 to 2000 (Bowdler, 2005). Predatory lending is very difficult to pinpoint. Its features are subtle and difficult to define. Predatory loans are characterized with high interest rates and mandatory arbitration clauses. Interest rates charged on loans borrowed are often higher than warranted by borrower's credit risk. The mandatory arbitration clauses often force borrowers to give up their right to litigate in the event that something….....

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