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In my old memories my teacher said that we can't have a company who are not profitable. The reason is to prevent unfair competition.

Ex :

  • Toyota sell car at 10 \$ during 2 years.
  • Every other mark brand have to close shop because they don't make any sell.
  • Then Toyota can sell his car 100 000 \$ because they are the only ones on the market.

So how some big companies like UBER can be in the red since 5 years ?

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    $\begingroup$ For many years I believe Amazon ran negative profits becauase they were trying to gain market share. If the owner has enough money to do this, it may be seen as "long run profit maximizing". I'm saying this in a comment rather than answer because I don't know much about this. $\endgroup$ Commented May 23, 2022 at 9:46

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It is allowed to not be profitable. What you are referring to is the practice of predatory pricing or dumping, that is selling below cost of production, with intent to drive competitors out of business and then later raise prices. This is not the same as company being unprofitable (since company can do so by cross-subsidizing the product from sales of other product etc).

Many countries have some anti-dumping legislation. In the US there are anti-trust laws that prohibit it (although anecdotally I heard it’s very difficult to prove company is engaging in dumping). Also on when it comes to international trade it’s not prohibited per se but companies engaged in dumping will get retaliated by special anti-dumping duties that offset the lower prices (see more details here).

Hence Uber being in red is not problematic per se. What would be problematic is if they engage in predatory pricing. That would have to be also proven in court because predatory pricing is not simply providing lower price than anyone else.

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  • $\begingroup$ Thank you for this clear answer. I have one question more. Who is in charge to prove it in a court ? Is it the concurrency or there are some people in charge at the gouvernement ? $\endgroup$
    – Softon
    Commented May 24, 2022 at 12:41
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    $\begingroup$ @Softon that depends on the jurisdiction. In some countries someone has to file a claim in some there is agency prosecuting firms when they believe someone is behaving in an anticompetitive manner $\endgroup$
    – 1muflon1
    Commented May 24, 2022 at 12:55
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Adding in a fiscal policy perspective: the tax treatment of profitable companies and unprofitable companies is asymmetric, because losses can be carried forward which reduces the marginal tax rate of unprofitable companies. In turn, this can lead to the strategies mentioned by others here once those companies do become profitable.

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