Predatory Pricing and Abuse of Dominant Position in Ecuador: Evidentiary Limits and Institutional Effectiveness

Abstract

Predatory pricing is an anticompetitive strategy whereby an undertaking with significant market power sets artificially low prices, below its relevant costs, with the deliberate aim of driving rivals from the market. Because of its exclusionary nature, the conduct is unlawful; however, it remains difficult to prosecute, as it requires demonstrating both the initial “sacrifice” and the realistic prospect of subsequent recoupment of the losses incurred.

In smaller economies such as Ecuador’s, the issue is particularly acute. A dominant firm with substantial financial capacity may deploy predatory pricing to force out a financially fragile competitor unable to sustain prolonged losses, in markets marked by weak oversight and limited substitutability, thereby entrenching a local monopoly.

This article addresses the problem through an integrated economic and legal analysis focused on Ecuador, proposing the effectiveness of the existing regulatory framework and advancing targeted reforms aimed at safeguarding legitimate competition and overall welfare.