The Areeda-Turner test is a method used to ascertain whether a company is engaging in predatory pricing, which involves selling products at a price lower than their production cost. This practice is deemed illegal as it can drive other companies out of business and diminish competition. The test derives its name from two individuals who published an article about it in a legal journal. If a company is found guilty of employing predatory pricing, they may face penalties under antitrust legislation.
The Areeda-Turner test is a commonly used economic tool in antitrust law to assess whether a company is involved in predatory pricing. Predatory pricing occurs when a company sells its goods or services at a price lower than the production cost, with the intention of eliminating competitors and establishing a monopoly. According to the Areeda-Turner test, if a company sells its products or services below the average variable cost, it is presumed to be engaging in predatory pricing and is considered illegal. For instance, if a company sells a product for $5 while incurring a production cost of $7, it is selling below the average variable cost and may be practicing predatory pricing. The Areeda-Turner test is widely recognized by federal courts as a means to determine if a company is violating antitrust laws. These laws are in place to foster competition and prevent monopolies, which can negatively impact consumers by limiting choices and increasing prices.
The Areeda-Turner Test is a legal framework used to determine whether a business practice violates antitrust laws.
Antitrust laws are laws that promote fair competition in the marketplace and prevent monopolies and other anti-competitive practices.
The Areeda-Turner Test is used when there is a question of whether a business practice violates antitrust laws.
The Areeda-Turner Test considers factors such as the market share of the business, the barriers to entry for competitors, and the potential harm to consumers.
The Areeda-Turner Test is applied by analyzing the relevant factors and determining whether the business practice in question is likely to harm competition and consumers.
The purpose of the Areeda-Turner Test is to promote fair competition in the marketplace and prevent anti-competitive practices.
The Areeda-Turner Test was developed by legal scholars Philip Areeda and Donald Turner.
No, the Areeda-Turner Test is not used in all antitrust cases, but it is a commonly used framework for analyzing antitrust issues.
Yes, the Areeda-Turner Test can be used in international antitrust cases, but it may need to be adapted to fit the specific legal and economic context.
The Areeda-Turner Test differs from other antitrust tests in its focus on economic analysis and its consideration of factors such as market share and barriers to entry.
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This glossary post was last updated: 17th April 2024.
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