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Simple English definitions for legal terms
Areeda–Turner test
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A quick definition of Areeda–Turner test:
The Areeda-Turner test is a way to determine if a company is using predatory pricing, which means selling products at a price that is lower than what it costs to make them. This is illegal because it can force other companies out of business and reduce competition. The test is named after two people who wrote an article about it in a law journal. If a company is found to be using predatory pricing, they can be punished under antitrust laws.
A more thorough explanation:
The Areeda-Turner test is an economic test used in antitrust law to determine if a company is engaging in predatory pricing. Predatory pricing is when a company sells its products or services at a price below the cost of production in order to drive competitors out of business and gain a monopoly.
The Areeda-Turner test states that if a company is selling its products or services below the average variable cost, it is presumed to be engaging in predatory pricing and is therefore illegal.
For example, if a company is selling a product for $5 but it costs them $7 to produce, they are selling it below the average variable cost and may be engaging in predatory pricing.
The Areeda-Turner test is widely accepted by federal courts and is used to determine if a company is violating antitrust laws. Antitrust laws are in place to promote competition and prevent monopolies, which can harm consumers by limiting choices and driving up prices.