State Sales Below Cost Laws: Hunting Sheep in Wolves Clothing

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Jeremy D. Oller

Abstract

This paper examines whether state laws to prevent below cost sales provideprotection for small businesses beyond the protection afforded by the federal antitrustlaws. The paper first identifies the theoretical implications of state sales below cost laws.I find that there are various circumstances when the state law will provide additionalprotection to the federal predatory pricing laws. The uniqueness of the empirical sectionof this paper is based on the functional form of the tests and the distinctive features of thestate laws used to discern the laws impact on small businesses. I find that state laws dohave a small impact on the viability of small businesses in certain industries. Additionally,the differences among the state laws also have an impact on the percentage of smallbusinesses in a state. However, it does not appear that these laws are reducing the pricingbehavior that could be deemed predatory. This implies that the effects of these laws arepotentially inconsistent with the goals of competition (K12)

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