Consistent with existing law, the proposed rule would require proof of the following elements: (1) a facilitating market structure, (2) a scheme of predation and supporting evidence, (3) probable recoupment, (4) price below cost, and (5) absence of an efficiencies or business justification defense.

Proving predatory pricing in 2026 requires meeting a high legal "two-prong" burden of proof established by anti-monopoly laws like the Competition Act or the Sherman Act. First, the plaintiff must prove "Price Below Cost," showing that a dominant firm is selling its products or services at a price lower than its own Average Variable Cost (AVC) or Average Avoidable Cost (AAC). This often involves complex forensic accounting to isolate production costs. Second, the plaintiff must demonstrate a "Dangerous Probability of Recoupment," proving that the predator has enough market power to drive out rivals and then raise prices high enough to recover the initial losses. Intent is also a factor; evidence of internal memos or strategies specifically aimed at "eliminating competition" rather than just "meeting a price" can solidify a case. Without proving that the firm can eventually monopolize the market and harm consumers, low prices are often legally viewed simply as "pro-competitive" behavior.

Proving predatory pricing is a complex legal and economic challenge that requires meeting a high burden of proof. It involves demonstrating not just low prices, but a specific anti-competitive strategy. Here’s a breakdown of the process, standards, and key elements:

The Legal Framework (Primarily U.S. Law)

In the United States, the standard was established by the Supreme Court in Brooke Group Ltd. v. Brown & Williamson Tobacco Corp. (1993). To prove predatory pricing, a plaintiff must establish two essential elements:

1. Below-Cost Pricing: The alleged predator’s prices were below an appropriate measure of its costs.
2. Dangerous Probability of Recoupment: The predator had a dangerous probability of recouping its investment in below-cost prices by charging supra-competitive (monopoly) prices after competitors are driven from the market.

Both prongs must be proven. Failure to prove either is fatal to the case.

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Step-by-Step: How to Build a Case

1. Define the Relevant Market

You must first establish the product and geographic market. This shows the arena in which predation is allegedly occurring. The market must be defined narrowly enough to demonstrate the predator’s power but accurately to reflect competitive realities.

2. Prove Below-Cost Pricing (The First Prong)

This is not simply “low” or “unfair” prices. You must show prices were below a specific cost benchmark. The choice of benchmark is critical and often disputed.

• Common Cost Measures:
  • Average Variable Cost (AVC): The cost of producing one additional unit (materials, labor, energy). Prices consistently below AVC are strong evidence of predation.
  • Average Avoidable Cost (AAC): The costs a company could have avoided if it had not produced the predatory output. Often similar to AVC.