Predatory Pricing: Definition, Example & Why It’s Used (2025 Guide)

Predatory pricing is back in the spotlight in Australia, as regulators and the business community debate whether some of our biggest companies are using it to squeeze out competitors. But what exactly does this term mean, why does it matter in 2025, and how could it impact your wallet?

What Is Predatory Pricing?

Predatory pricing is a strategy where a business deliberately lowers its prices—sometimes below cost—with the goal of driving competitors out of the market. Once rivals have exited and competition has been reduced, the company may hike prices again to recoup losses and maximise profits.

In Australia, predatory pricing is illegal under the Competition and Consumer Act 2010 if it substantially lessens competition. The Australian Competition and Consumer Commission (ACCC) monitors and prosecutes such behaviour, but proving intent and effect can be tricky.

• Key features of predatory pricing:
  • Prices set below cost for a sustained period
  • Intention to eliminate competitors
  • Potential for increased prices after rivals exit

Real-World Example: Supermarket Wars

Australia’s supermarket sector has often been cited in predatory pricing debates. In 2023, the ACCC launched an inquiry into claims that major chains were pricing some grocery staples below cost, making it difficult for independent grocers to compete. While the supermarkets argued this was simply aggressive competition, critics pointed to shrinking options for consumers in regional areas.

Here’s how a classic case might play out:

• A large supermarket chain slashes milk prices to $1 per litre—well below the cost of production.
• Smaller local grocers can’t match the price without taking unsustainable losses.
• Over several months, some independents close or stop stocking the product.
• Once competition thins, the major chain quietly increases milk prices.

While the ACCC has not found conclusive evidence of predatory pricing in all high-profile cases, the risk remains a live issue, especially as supply chains face pressure and cost-of-living concerns intensify in 2025.

Why Is Predatory Pricing Used—and What’s Changing in 2025?

Companies may resort to predatory pricing for several reasons:

• Market dominance: To capture a larger share, especially in sectors where scale brings efficiency.
• Driving out new entrants: Discourage startups or smaller players from gaining a foothold.
• Short-term consumer appeal: Attract price-sensitive shoppers, even if only temporarily.

However, the long-term consequences can be severe. When competition disappears, prices often rebound, choice narrows, and innovation stalls.

In 2025, Australia’s regulatory landscape is evolving. The ACCC has been granted stronger investigative powers under new amendments to the Competition and Consumer Act. There’s also increased scrutiny of digital platforms and online marketplaces, where predatory pricing can occur at lightning speed and on a national scale. For instance, rapid price drops on e-commerce sites can force smaller sellers out almost overnight.

What Should Consumers and Businesses Watch For?

• Sudden, unsustainable price drops from dominant brands or platforms
• Consolidation—fewer local options or independent businesses closing
• Price hikes following competitor exits
• ACCC investigations or court cases involving major retailers or tech firms

For business owners, understanding the fine line between healthy competition and illegal predatory pricing is crucial. In 2025, the ACCC is prioritising enforcement in sectors under cost-of-living pressure, including groceries, fuel, and digital services. If you suspect anti-competitive conduct, documentation and early legal advice are key.

Conclusion

Predatory pricing isn’t just a theoretical concern—it’s an issue that can reshape entire markets and affect everyday Australians. As regulators ramp up enforcement and scrutiny in 2025, both consumers and businesses should stay alert to the warning signs and understand the rules shaping Australia’s competitive landscape.