Q: A new superstore opened in our neighborhood, selling well below the prices of all other stores in the area. Is undercutting the market viewed positively in halachah?
A: In general, one who sells below the market rate is viewed positively, since this will lead other sellers to lower prices, and reduce the market rate for consumers (C.M. 228:18).
However, some authorities limit this to foodstuffs, which are essential for consumers, whereas for other commodities they maintain that it ruins the market and causes losses to owners of smaller store (Erech Shai 156:5; Aruch Hashulchan 228:14). Others, though, certainly do not differentiate if the other sellers can compete with these lower prices (Chochmas Shlomo 228:18; Pischei Choshen, Geneivah 14:14).
Nonetheless, many authorities prohibit predatory pricing, when the goal is to eliminate competition by selling at a price that others cannot compete with and that cannot be economically justified, sometimes even at a loss. This causes great loss to other store owners, and also raises concern that after eliminating competition, prices will be raised again (Hilchos Mishpat 228:18).