Florida Real Estate Broker ExaminationReal Estate Brokerage ManagementHard
A Florida real estate broker is involved in managing a multi-unit apartment building. The broker discovers that a competing property management company in the same market is consistently advertising rental rates significantly below market value, seemingly to drive out smaller competitors. This practice may be a violation of which antitrust law concept?
- APrice fixing
- BPredatory pricing
- CMarket allocation
- DTying arrangements
Show answer & explanationAnswer & explanation
Correct answer: B. Predatory pricing
Predatory pricing is an antitrust violation where a company sets prices at an extremely low level, often below cost, with the intent of eliminating competition and subsequently raising prices once competitors are gone. This scenario describes a competing company advertising rental rates significantly below market value to drive out smaller competitors.
Why the other options are wrong
- A. Price fixing involves an agreement among competitors to set prices, not a single company unilaterally setting low prices.
- C. Market allocation involves an agreement among competitors to divide up markets or customers.
- D. Tying arrangements involve making the sale of one product conditional on the purchase of another.
Predatory Pricing
An antitrust violation where a dominant company sets prices extremely low, often below cost, with the intent to eliminate competition and then raise prices once competitors are out of the market.
- Illegal under antitrust laws.
- Requires intent to monopolize.
- Differs from legitimate competitive pricing.
- Focuses on harming competition, not just outcompeting.
Memory trick: Antitrust laws: fair play, or you'll pay.