Predators: ecological roles and behavior

Business Law (predators

Businesses often engage in predatory practices to deter their competitors from entering their market niches or send their competitors out of business. Certain business ventures usually reduce their prices to destroy their rivals or worse still discourage new entry into the market. This happens regardless of the existence of the Sherman Act that was enacted to prohibit this predatory practice. The Sherman Act has largely been considered vague because of its inability to reign in firms that engage in predatory pricing vice (Areeda & Turner, 1975). Business ventures that engage in predatory pricing tend to draw a very vague line between legitimately competitive prices and prices that are utterly predatory. Businesses that engage in predatory pricing normally price their products below appropriate measure of cost with an intention of driving their financially weaker competitors out of business and establishing monopoly power. Courts have failed to address the issue of predatory pricing in context of the antitrust laws (Oster & Strong, 2001). There are no standards that address cost/price test. The antitrust laws have failed to come up with standards that hold prices below average variable cost as predatory. There is more to predatory pricing that is not known as it also involves intertemporal behavior patterns that cannot be adequately addressed by comparison of prices and costs. It is a strategic behavior with intertemporal undertones (Oster & Strong, 2001). Those engaging in predatory pricing do not incur losses in standard accounting sense. He incurs lower profits. The predator incurs economic losses as opposed to accounting losses.

Other than predatory pricing, there are also other predatory practices like the predatory lending that is very prevalent in mortgage lending in Hispanic communities. Predatory lenders thrive in subprime market in Latino communities where subprime mortgage grew by 26% in from 1994 to 2000 (Bowdler, 2005). Predatory lending is very difficult to pinpoint. Its features are subtle and difficult to define. Predatory loans are characterized with high interest rates and mandatory arbitration clauses. Interest rates charged on loans borrowed are often higher than warranted by borrower's credit risk. The mandatory arbitration clauses often force borrowers to give up their right to litigate in the event that something is wrong with their loan. Other features of predatory loans are asset-based lending, balloon payments, and prepayment penalties. Predatory lending basically targets unsuspecting borrowers (Bowdler, 2005). Among the Latinos, the buyers with regard to Land Contract pay the sellers directly based on a written contract that states that after a certain number of payments the buyer is eligible to purchase the property. The buyer makes a downpayment and eventually makes a payment after some period of time after which a balloon payment is done via standard mortgage (Bowdler, 2005).

Lenders and brokers engaging in predatory lending often engage in push tactics and independent third-party brokerage activities. Lenders and brokers engage in aggressive marketing techniques where consumers do not seek for credit. The loan officers and brokers, affirmatively offer credit and loan products (Bowdler, 2005). They do door-to-door sales accompanied with attractive characteristics like low or no interest. Predatory advertisers go for less sophisticated borrowers promising to qualify them for home loan regardless of their previous foreclosures. Independent third party brokers also take advantage of people who are intimidated by home buying processes. These third parties connect these families to mainstream financial services. Some of them prey on unsuspecting consumers by steering them to dubious products and high-cost loans (Bowdler, 2005).