In 1992, the U.S. Supreme Court put the kibosh on predatory-pricing claims. Recognizing that “predatory pricing schemes are rarely tried, and even more rarely successful,” the court adopted a test that has proven insurmountable in the intervening two decades. It is now generally accepted that low prices — even so-called “predatory prices” — benefit the consumer, encourage demand and increase output. Unless a plaintiff can show that the low prices will lead to higher prices down the road, the courts will not judicially ban the discounting.
This is the where the law stood until recently, when the First District Court of Appeal, in Bay Guardian Co. v. New Times Media LLC , 10 C.D.O.S. 10243 , expressly rejected the Supreme Court’s standard for purposes of California law, effectively returning the state to a long since rejected competitor-protection regime, rather than the current consumer-protection model. Under this new framework, virtually any below-cost pricing is presumptively suspect and can potentially lead to liability. This gives firms — large and small — a potent weapon to challenge their competitors’ aggressive pricing strategies in court.
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