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Resale below Cost Laws and Regulations

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Abstract

Despite general agreement that consumers benefit from lower prices that are not predatory, several nations have laws against loss leader sales even when they are unlikely to foreclose competition. These laws appear to protect competitors rather than competition. The Competition Committee’s roundtable discussion in October 2005 focused on efforts to reform or remove laws against loss leader sales and efforts to prevent such restrictions from being enacted. The Secretariat background note argued that rules again loss leader sales should be sunsetted because they are likely to harm consumers and protect inefficient competitors, fail to account adequately for pro-competitive business justifications for loss leader sales and detract from economic dynamism and growth. Japan, Germany and France, defended their rules against price competition, although France was in the process of a reform. Members of a second group of countries were working to remove laws against loss leader sales. The nations in a third group with no law against loss leader sales, reported efforts by groups of competitors to have such rules applied either at the national level or at the state/provincial level. Both the consumer and business submissions argued that prohibiting loss leader sales is likely to harm consumers and protect competitors, rather than competition.

Suggested Citation

  • Oecd, 2007. "Resale below Cost Laws and Regulations," OECD Journal: Competition Law and Policy, OECD Publishing, vol. 9(1), pages 169-255.
  • Handle: RePEc:oec:dafkaa:5l4fk7vrbsr0
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    File URL: http://dx.doi.org/10.1787/clp-v9-art4-en
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    Cited by:

    1. Noriaki Matsushima & Akira Miyaoka, 2013. "Who benefits from resale-below-cost laws?," ISER Discussion Paper 0875, Institute of Social and Economic Research, Osaka University.
    2. Vanessa von Schlippenbach, 2008. "Complementarities, Below-Cost Pricing, and Welfare Losses," Discussion Papers of DIW Berlin 788, DIW Berlin, German Institute for Economic Research.
    3. Inderst, Roman & Obradovits, Martin, 2015. "Too Much Attention on Low Prices? Loss Leading in a Model of Sales with Salient Thinkers," CEPR Discussion Papers 10813, C.E.P.R. Discussion Papers.

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