Unfair competition refers to business practices that distort competitive outcomes by using deception or exclusionary tactics rather than competing on price, quality, or innovation. In economics, the idea shows up in two closely related areas: competition policy (antitrust) and trade policy (dumping and subsidies).
How Unfair Competition Shows Up
Deceptive practices
Examples include misrepresentation and misleading advertising. These can reduce consumer welfare and shift demand away from better products, which is why consumer protection and truth-in-advertising rules exist.
Exclusionary practices (competition policy)
Examples include predatory pricing, exclusive dealing, and other tactics aimed at raising rivals’ costs or driving rivals out. The core economic concern is durable market power: if exclusion succeeds and entry is blocked, prices can rise and output can fall.
A key difficulty is separating illegal exclusion from aggressive but legitimate competition. Cutting prices is normally good for consumers, so predatory pricing is usually evaluated using evidence like below-cost pricing plus a realistic path to recoup losses later.
Trade-related claims (dumping and subsidies)
In international economics, “unfair competition” is often shorthand for:
- dumping: selling abroad at unusually low prices (relative to benchmarks),
- subsidized exports: where government support lowers costs and shifts market share.
Countries sometimes respond with anti-dumping duties or countervailing duties, which are policy tools with their own trade-offs and risks of retaliation.
Related Terms
- Competition Policy
- Antitrust
- Predatory Pricing
- Dumping
- Subsidy
- Monopoly
- Monopolistic Competition
- Barriers to Entry
- Price Discrimination