Hillary Clinton vs Valeant: “Predatory Pricing” or Price Gouging?

business_ethics_highlights_2When on the stump, political candidates of all parties are likely to both misspeak and to make campaign promises that encourage the public’s ignorance of economics. Here, U.S. presidential candidate Hillary Clinton offers a perhaps rare two-fer. Predatory pricing is pricing goods below cost in an attempt to drive competing sellers out of the market. Price gouging is raising the price of goods opportunistically to the detriment of consumers. In terms of pricing strategy, they are opposites: predatory pricing involves pricing down; price gouging involves pricing up. In terms of their strategic objectives, they are divergent: predatory pricing is used to gain at the expense of competitors; price gouging is used to gain at the expense of consumers. Clinton thus misdescribes Valeant’s alleged opportunistic, consumer-unfriendly high pricing as competitive-advantage-seeking, consumer-friendly low pricing. Her campaign ad doubles down on this misdescription. How many Americans will now confuse freely predatory pricing and price gouging? (How many economics exam grades will be affected this semester?) >>>

LINK: Hillary Clinton Says She’s ‘Going After’ Valeant In New Campaign Ad (by Sy Mukherjee for Fortune)

The 30-second spot, titled “Predatory,” features a Clinton town hall from January in which she recounts an attendee’s experience with steep Valeant price increases. Clinton describes how the woman’s therapy went from a price tag of $180 for 10 shots in the 1980s to $14,700 for the same quantity today. While the ad doesn’t mention the drug’s name, Stat News reports that it is the migraine medication dihydroergotamine.

“The company is called Valeant Pharmaceuticals,” says Clinton in the ad as a picture of the drugmaker’s Bridgewater, NJ facility, complete with logo, flashes on the screen. “I’m going after them. This is predatory pricing, and we’re going to make sure it is stopped.”

What do you think?

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  1. Anthony Hendrickson

    It’s obviously a problem, but it is NOT “predatory pricing” (https://www.ftc.gov/tips-advice/competition-guidance/guide-antitrust-laws/single-firm-conduct/predatory-or-below-cost) but Price Gouging.

  2. “Predatory Pricing” is a technical term, of course. But in colloquial English, might not pricing that seems, well, predatory (in the sense of “to predate upon consumers”). We run into the same problem with “Conflict of Interest,” a term of art that sometimes gets carelessly used, confusingly, to talk about situations in which 2 people’s interests conflict.

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