Contents
Predatory pricing involves substantially reducing the price of a product or service with the intention or effect of undercutting competition and preventing new businesses from entering the market. The Australian Competition & Consumer Commission (ACCC), Australia’s consumer watchdog, continues to recognise predatory pricing as an illegal misuse of market power in 2025.
So can prices be too low? In short, the answer remains yes, and in some circumstances, it could indeed be against the law.
Maintaining competitive prices in a tightly contested market is crucial to growing your business sales and attracting a loyal customer base. In today’s fast‐paced economic environment, well-considered pricing not only builds consumer trust but also fosters healthy industry competition—a process that benefits both thriving businesses and consumers enjoying fair pricing.
Whether you’re a small business owner who feels adversely affected by predatory pricing, or you simply wish to understand how to competitively price your products and services within the bounds of the law, we’ve outlined some key points about predatory pricing to help you stay on track.
How Does Predatory Pricing Occur?
Predatory pricing occurs when a business with a substantial degree of market power deliberately sets prices at an extremely low level over a sustained period. This approach is not inherently unlawful—in fact, the ACCC recognises that businesses are free to set prices or offer deep discounts as they deem appropriate, even if this occasionally involves pricing below cost.
However, it becomes illegal when a business deliberately lowers its prices with the purpose, or the effect or likely effect, of damaging or eliminating competition. It is this anti-competitive behaviour that lies at the heart of predatory pricing.
| Example In a notable historical example, Aberdeen Journals, a United Kingdom newspaper group that once held a dominant market position in local newspaper advertising, reduced the price of advertising to below-cost levels between the late 1990s and early 2000s. This persistent campaign aimed to drive out its sole direct competitor—a local independent newspaper—and ultimately led to a £1.3 million fine imposed by the Office of Fair Trading. Although this case dates back over two decades, its principles continue to influence regulatory practices in Australia and globally. |
What Are The Negative Effects Of Predatory Pricing?
The ACCC has identified several ways in which predatory pricing can harm a market:
- Forcing smaller competitors to exit the market;
- Punishing or disciplining competitors for competing aggressively; or
- Creating barriers for new potential competitors seeking to enter the market.
While ultra-low prices may initially appear attractive to consumers, they can lead to significant long-term disadvantages. Often, a large business engaging in predatory pricing may absorb short- to medium-term losses, but these losses can force smaller competitors out of the market, ultimately reducing consumer choice and enabling the predatory firm to later exploit its dominant position.
Once competitors have been driven out or new entrants deterred, the market may collapse into a situation where fewer players operate—sometimes leaving the predatory business with monopolistic power. In such a scenario, the business may eventually raise prices sharply to recoup its earlier losses, which can harm consumers in the long run.
What Is The Law On Predatory Pricing?
Although predatory pricing is not explicitly detailed in legislation, it is regarded as a misuse of market power under section 46 of the Competition and Consumer Act 2010 (CCA)—a national law governing business practices, consumer rights, and anti-competitive behaviour. In 2025, these legal principles remain central to ensuring fair competition.
The Act stipulates that a business with a substantial degree of power in a market must not engage in conduct intended to, or likely to, significantly lessen competition. This means that even if there is no overt intent, if the pricing strategy results in diminished competition, it constitutes an illegal misuse of market power.
A business that possesses significant market power can often operate independently of normal market forces such as competition, suppliers, or consumer preferences. Factors such as financial strength, market share, and the ability to stifle competition all contribute to determining this market power.
Recent updates in 2025 have seen the ACCC placing even greater emphasis on the continuous review of pricing strategies—particularly in rapidly evolving digital and e-commerce sectors. For detailed insights into how these updated regulatory perspectives impact your business, you might find our piece on market competition guidelines especially useful.
How Should I Price My Products Instead?
With all of this in mind, determining the right price for your goods and services can feel like a daunting process, given the potential consequences of non-compliance with pricing laws. It is crucial that your pricing strategy not only attracts customers but also adheres to the legal framework set out by competition and consumer law.
The Recommended Retail Price (RRP) provides a useful starting point—it is the price suggested by a supplier for a product sold by a retailer. From there, you should calculate the total costs involved in producing or delivering your service and determine the profit margin that suits your business model. Additionally, consider your market positioning—whether you offer high-end, premium products or more budget-friendly options—as well as the pricing of competitor products.
Aside from adhering to laws against predatory pricing, it is essential to ensure that your overall pricing strategy complies with broader regulations under the Australian Consumer Law. For instance, if you use comparative pricing tactics to show discounts by comparing a current price to a previous one, any misleading or untruthful claims can result in significant legal breaches. We’ve discussed these implications in more detail in our Recommended Retail Price: How Do You Know If Your Price Is Right guide. If you’re uncertain about any aspect of your pricing strategy, our small business lawyers are here to provide tailored advice.
The Takeaway
Predatory pricing typically involves a business with a dominant market share and significant financial strength lowering its prices either to deliberately harm competitors or as a consequence of a strategy that is likely to damage competition. However, it is important to remember that businesses retain the freedom to set their prices—even if this means temporarily operating at a loss. The key legal issue arises when the pricing strategy is aimed at, or likely to, substantially reduce competition.
Whether or not the law has been breached hinges on the anti-competitive purpose or effect underlying the conduct. Factors such as the duration of the low pricing period and the overall market power of the business play critical roles in determining if the behaviour qualifies as predatory pricing.
Need Help?
While it might seem harmless for a business to lower its prices, if the purpose or effect of doing so is to damage competition, the pricing may be deemed predatory. If you believe your business has been adversely affected by such strategies, or if you need clarity on the regulations impacting your pricing, we’re here to help.
Contact our team for a free, no-obligation chat at team@sprintlaw.com.au or call 1800 730 617. Our experts are ready to guide you through the complexities of competitive pricing and market compliance.
As 2025 unfolds, it is more important than ever to continually review your pricing strategy in light of evolving market conditions and updated ACCC guidelines. Staying informed and adapting your approach will help you maintain a balance between competitive pricing and legal compliance. For additional insights on current market dynamics and legal best practices, explore our resources on market competition guidelines and consider consulting with our team of small business lawyers for tailored advice to future-proof your business.
Get in touch now!
We'll get back to you within 1 business day.
Top 3 Legal Mistakes
Book in a free consultation with us to discuss your legal needs.