Predatory pricing is a pricing strategy exemplified by large businesses intended to drive out the competition. Large businesses such as Wal-Mart or Target will generally open in a new location and set their prices much lower than their competitors, since they can afford to do so. Once the competition is forced to close down since they can no longer compete, the large business will then raise their prices back up since they now have a pseudo-monopoly. This pricing strategy is extremely harmful to small mom-and-pop businesses as they can of course not compete with the pricing capabilities of Wal-Mart and Target, and puts a lot of people out of business who are then forced to take jobs at the same companies that caused them to be unemployed, companies that generally don’t have the best employee reputations.

A anti-Wal-Mart mural set up in Kensington Market

In my opinion, this is a very unethical pricing strategy. It completely disregards the lives of your competitors and also completely changes the business environment of the places they expanding to. This is also illegal in many countries, including Canada. However, despite being illegal, it still happens often and it is hard to prove that the company purposely lowered prices with the intention of driving out competition.

A recent example of this occurred when Wal-Mart tried to open a location in Kensington Market, a tight-knit downtown Toronto community full of unique specialty mom-and-pop stores. However, the community did not want to allow this to happen and mobilized together to stop it. Currently, the City of Toronto put a one year freeze on retailers on the strip, but it is still unclear of where this is going to move in the future. I think this is a really great thing that this community is doing to try and stop this, because they know that as much as they will still try to support local businesses, once Wal-Mart opens, it will not be long before all small business will be out of business. More can be read about this here.