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anti-competitive practice

Contributor(s): Ivy Wigmore

An anti-competitive practice is an action conducted by one or more businesses to make it difficult or impossible for other companies to enter or succeed in their market. The market distortion resulting from anti-competitive practices can result in higher prices, poorer service and a stifling of innovation, among other effects. As such, anti-competitive practices are illegal in most countries and are prohibited under antitrust law in the United States.

Anti-competitive practices may be single-company efforts or may involve agreements among two or more businesses. Collusion involves unethical collaboration among competitors to exert unwarranted control over a given market. Companies may collaborate to establish and agree upon anti-competitive practices that will increase their domination of a given market.

Examples of anti-competitive practices include:

Predatory pricing: A company with a monopoly or multiple companies colluding demand an exorbitant price for a product that consumers need, such as a medication.

Price-fixing: When the businesses involved control their market (as in an oligopoly), they essentially have a captive audience in consumers for their product. Agreeing among themselves allows them to set the price higher than it might be if the market was more competitive.

Dumping: An established company sells its product at such a low price that smaller businesses cannot compete and may be forced out of the market.

Dividing territories: Two or more large companies agree not to compete in defined geographical areas.

Patent abuse: For example, a business might purchase huge numbers of patents related to their market to drive competition out. In another example, the entire business model of patent assertion companies, sometimes called patent trolls, consists of obtaining patents and profiting from them through patent infringement claims.

This was last updated in April 2019

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