Comment by cyberax
20 hours ago
Offering goods or services below the cost of their production is often illegal, though. It's called "dumping".
Although in this case it's probably impossible to define, given the complexity of calculating the true cost of tokens.
> Offering goods or services below the cost of their production is often illegal, though. It's called "dumping"
No.
Dumping is an international-trade term. It doesn’t even require pricing below cost, just aiming “to increase market share in a foreign market by driving out competition and thereby create a monopoly situation where the exporter will be able to unilaterally dictate price and quality of the product” [1].
Loss leaders are common in commerce and entirely legal, as are free trials. I struggle to think of a competent jurisdiction that bans them.
[1] https://en.wikipedia.org/wiki/Dumping_(pricing_policy)
I'm sorry, my fault. I studied economics in Russia, and the term "dumping" was used in a more general sense as "selling goods or services below their cost".
Russian laws officially use the term "monopolistically low prices", and prohibit them if the entity engaging in such pricing holds a dominating presence in the market (and not necessarily for the goods that are being underpriced).
A correct term for the US is "predatory pricing", and it's also prohibited by the Sherman Act. For much the same reason, a large entity can destroy competition by accepting losses from selling goods below the cost. The border between loss leaders and predatory pricing is, as usual, very blurred.
> I studied economics in Russia, and the term "dumping" was used in a more general sense as "selling goods or services below their cost"
Oooh! Do you have a recommendation for a translation of a Russian economics text? I’m particularly curious of Soviet-era texts that work on theory without prices.
> correct term for the US is "predatory pricing", and it's also prohibited by the Sherman Act
Sherman prohibits the “restraint of trade or commerce” [1]. The word “price” never appears in its text. In practice, predatory pricing is a tightly-regulated term that doesn’t generally prohibit selling goods below cost
[1] https://www.govinfo.gov/content/pkg/COMPS-3055/pdf/COMPS-305...
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So every company that is not immediately selling enough to cover its fixed costs and its variable cost should be illegal? Every company and every new initiative must be profitable from day one in your world?
If it's a large company, that can dominate the market by absorbing the losses until competition disappears?
Arguably, yes.
So that means for instance it was illegal for Netflix to get into the streaming business or for Apple to start selling iPods because neither could do it profitably from day one?
Should Microsoft have not been allowed to sell operating systems and still survive from selling BASIC interpreters? Should Nintendo have not been allowed to sell video games and still be selling playing cards?
Every company that is interested in survival takes profits from an existing business to start a new one,
So it would be illegal for Google but legal for Anthropic?
What about OpenAI?
The question is over what timescale and volume.
Toyota shouldn't have to sell their first new car off the line for 100 million to pay for the entire manufacturing line.
Your first SAAS customer shouldn't have to pay back all your costs.
Can you plan to break even after your first month of sales? first year? 10 years?
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And in this case the subsidy is paid for by tied sales from other users that don't actually use the service, which is another illegal business practice.
Tying is typically perfectly legal in both the EU and the US.
This isn’t even vaguely similar to illegal tying. The biggest problem being that the products almost certainly aren’t dissimilar enough to be considered “tied” at all.
So cable bundling channels is also “illegal” according to you? Since I don’t watch sports?
There certainly are jurisdictions where tv providers are legally required to offer channels a la carte.
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What are you talking about? Where is this illegal? It’s common to sell subscription services and then price them according to expected usage blended across the user base.
This obviously cannot be true, otherwise Costco would have been sued to oblivion for “dumping” their rotisserie chickens.
Forget about Costco, if some people here are so convinced this behavior is illegal they should be going after every fast food company that offers anything like "get a free/cheap xyz with any drink purchase!" Where the subsidy is obvious.
Costco gets to sidestep a lot of regulations because they technically are a private club with paid membership. The US anti-monopoly laws are also unusually weak.
In other countries, selling a $7 chicken if it's subsidized by the sale of other goods can indeed be illegal.
Do you have some countries in mind where that's illegal?
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First of all, I doubt they’re losing money in inference. Even across subscriptions. This is a tired argument that has been repeated so many times on HN.
Second, that’s not what dumping means. It’s a specific term for international trade.
Third, it’s not illegal to sell something for below the cost to make it. That’s another common misunderstanding.
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