A big name store comes into a town, opens up shop, and undercuts all the local retailer’s prices. They have tons of other stores, so they can soak taking losses at that store for a couple years: its not that different than any other version of starting up a new business and getting established. Once they’ve put enough of their competition out of business, they bring their prices back up to reasonable numbers; the damage is done.
This is not a new strategy, although the internet has certainly made it more global: Amazon is a pretty crazy company from nearly every perspective.
Also nothing new:
A guy is willing to do a job cheaper than his neighbor, for the same quality of work. His neighbor likes getting paid more, so he gets the local government to pass laws to make it illegal to undercut him, either directly or indirectly (licensing, immigration enforcement, prevailing wage, non-competes, and so on)
The discussion yesterday about whether the FuelPerks program was legal reminded me of what I learned in my Anti-Trust case: nobody really can define most forms of “collusion” and “price-fixing” in a functional manner. Everyone has this grand idea of everything working well and nobody exploiting anyone else, but when it comes time to make the sausage, what is and isn’t acceptable is really hard to determine.
There’s plenty of NIMBY (not in my backyard), and plenty of “its fine to fight dirty when its *my* job on the line”. But trying to craft good, consistent policy is really hard: people just want the most, best sausage at the best prices.
Is HyVee “colluding” with PDQs (and a few others) to undercut and unfairly exclude other gas stations with their FuelPerks program? Are the running illegal and anti-social loss-leaders to sell gas at lower prices than their competitors can?
Or did they just cooperate and come up with a mutual plan for supporting and advertising for each other, to provide better, lower prices to their customers on select groceries?
No clean answers or messages here, aside from so many of these things are far fuzzier than they might appear on the surface.
And the only winners when things are fuzzy and unclear are the lawyers, cause they get paid to fight in the fog.