A DISCUSSION OF LAW AND JOURNALISM

Pizza Wars

Pizza

By Drew Carroll & Nadia-Elysse Harris

Cheap and delicious pizza is as New York as the lights in Times Square. After a drunken night of partying, in between afternoon classes, or just in lieu of cooking – one dollar in New York City can get you a slice of pizza that will have you savoring every last greasy crumb.

There are 773 pizza restaurants on the island of Manhattan according to menupages.com, (pizza is also available at plenty of other places not actually listed as pizza restaurants, too) but on a small section of Avenue of the Americas between 37th & 38th Streets two restaurants serving pizza think that there is, perhaps, just one place too many. And each of them is pointing at the other.

A price war resulted and for now, at least, you can get pizza at both these joints for 75-cents a slice. In New York, where movies go for $13 and the rent is too damn high, this is newsworthy.

According to the New York Times, Bombay Fast Food/6th Avenue Pizza, an eatery offering –you guessed it — Indian food and pizza, was less than pleased to welcome its new just-next-door neighbor last October — 2 Bros. Pizza, part of a growing chain of New York pizza shops.

Bombay’s manager, Mohit Kumar Mitra, willingly states the obvious: that Bombay felt the pressure from 2 Bros., and decided to take competitive action, lowering the price of a slice to 79 cents. Mr. Mitra told us that, “within two hours,” 2 Bros. put a sign in front of their restaurant advertising 75-cent pizza. Bombay felt it had no choice but match it.

The Times reported that Bombay’s owner is “contemplating checking with a lawyer” to see if something could be done.  Bombay was being held hostage to its new neighbor’s lower price offerings, and though he didn’t say it, he was clearly worried that his business would suffer, he’d go out of business, and then 2 Bros. could raise its prices again.  There ought to be a law…But was there?

We figured we’d help the mom and pop shop out and do a little research. And while we were at it, have a slice or two ourselves.  

Arriving at the battlefront on a mild Saturday afternoon, we find competitive spirits high. Bombay is in the middle of replacing its large storefront sign, which was maroon colored and weather worn. The new one is a vibrant white, similar to 2 Bros., and prominently advertises Bombay as the “Pizza King.” The name is new, as marketing has become just another part of the war for pizza supremacy. The sidewalk in front of the two restaurants is cluttered with signs advertising 75-cent pizza.

On the inside the two stores could not be more unalike. 2 Bros. looks brand new with gleaming white tile, bright lights, and the entire storefront opens up to the sidewalk, offering a tempting respite for passing tourists. Despite the welcome from the inside, though, once inside the seating options are limited to either standing at tall tables in the front, or perching on low barstools at tables in the back.

Bombay is more dimly lit, and feels smaller. It seats probably half as many people as 2 Bros., taking on the look and feel of a local hangout. Looking around, we spot a group of Indian students looking well settled in a corner, with one fellow kicked back in a cozy looking leather armchair. Nobody here looks like first timers. (Interestingly, Bombay Fast Food also serves Mexican dishes. “Bombay Fast Food/Pizza King and Mexican Cuisine” is a bit of a mouthful, though).

We did our research before heading to midtown, and we’re ready to tell Mr. Mitra what we’ve learned.

What Bombay is accusing 2 Bros. of is predatory pricing. Put simply, predatory pricing occurs when a business offers its product below market price in order to drive similar businesses out of the market. And, well, it’s illegal.

The Sherman Antitrust Act is a federal statute intended to encourage competition and prevent large businesses from monopolizing entire markets. It expressly prohibits activities that restrict interstate commerce and competition in a particular market. Cases alleging predatory pricing under the Act usually involve usually involve large companies, as its those companies that tend to monopolize markets involving more than one state.

That’s certainly not the case between Bombay and 2 Bros. While the owners of Bombay would like to paint the picture of a larger than life chain coming in and stealing its business, let’s face it – 2 Bros. is no Pizza Hut. We’d never seen a commercial for it, or even heard of it. And reporter Nadia Harris is a pizza aficionado.

2 Bros. today is a chain of 11 small New York pizza parlors. In the grand scheme of things, Bombay and 2 Bros. are on equal footing. The Federal Trade Commission might even consider a pricing battle between these two businesses to be healthy, vigorous competition.

And so we turn to New York State law. Many states have laws that prohibit predatory pricing, but unfortunately for Bombay, New York is not one of them. The only “below cost law” in the Empire State is one that prohibits predatory pricing for cigarettes.  But it seems like pizza is fair game.

There is, however, a state law that mirrors the Sherman Antitrust Act. Section 340 of New York General Business Law does not specifically address predatory pricing, but it does prohibit businesses from “unlawfully interfering with the free exercise of any activity in the conduct of any business, trade or commerce.” Bombay may be able to seek remedy under state law after all. 2 Bros. is interfering with Bombay’s business… but is discounting a slice of pizza by 25 per cent interfering with the “free exercise” of a competitor’s business? That may be a harder thing to prove.

This wouldn’t be the first time two similarly situated Big Apple food fixtures went head to head.

Papaya King opened its doors for business in 1932. In subsequent years, Papaya Kingdom, Original Papaya and (probably the most well-known of its competitors) Gray’s Papaya all opened their doors. All of the shops sell similar fruit concoctions, but the product that tourists and native New Yorkers alike stand on long lines outside of these “papaya” shops for are the flavorful leathery hot dogs.

In 1990, Papaya King decided to take on Papaya Kingdom for infringing on its trade name. Papaya King was successful in its suit and Papaya Kingdom later changed its name to “Papaya Ingdom.” The suit proved hugely detrimental to the newly (oddly) named Papaya Ingdom brand, and the store closed its doors shortly thereafter.

But that was a trademark case. And Bombay and 2 Bros. don’t share a name in common. While Papaya King and Papaya Kingdom both sold the unique combination of fruit drinks and hot dogs, the only thing these two shops sell in common is pizza and soda. Bombay can hardly challenge 2 Bros.’ right to sell that.

And so we approach Mr. Mitra, prepared to give him all the pros and cons of suing 2 Bros., and we’re surprised to see him smiling, and eager to talk about how happy he is about the price wars. “This situation is good for us,” he says. Apparently the Times article got the word out about cheap pizza. Business, he says, is booming.

So, no legal counseling needed on this case after all.

There was only one thing left for us to do. The taste test. We shared a slice at each establishment, and we’re not telling our favorite. We liked both, and we’re going to stay out of this particular battle.

But if you’re in the area, by all means, stop in and have a slice at either one.  For 75-cents it’s a really good deal.

Comments

7 Comments »

7 Responses

  1. Penny says:

    2 Bros is known for its $1/slice bargain, the tradeoff being (as you said) there’s nowhere to sit down. So maybe it can afford the 75-cents/slice markdown. On the flipside, it sounds like Bombay Pizza serves more than just pizza, so maybe it makes its money on the Indian food and can also absorb the low pizza price, particularly if there’s a demand. In which case if this is about “predatory pricing,” neither is really going to drive the other out of business at those prices.

    Thanks for the tip on where to get New York’s cheapest pizza!

  2. NYLS Student says:

    I’m gona go to these two pizza spots and report back. The pizza/curry combo sounds like everything I need as finals season approaches.

    Well done, Drew & Nadia! Fun article!

  3. Drew and Nadia,

    So I think the key to “predatory pricing” is not so much that a business offers its product below market price, but it’s when the price charged is less than cost (average variable cost, short run marginal cost, whatever).

    Having said that, I really enjoyed reading your piece. I too have been following this particular skirmish over the past few weeks. The latest front has broken out over the price of their 18” pizza pies. Prices for the entire pie are now down to $6.00 (and Bombay Fast Food/6 Ave. is now offering theirs for even less: $5.99). You and your readers can learn more about the latest in the pizza price wars here: http://www.spruancegroup.com/blog/bid/53037/Pizza-price-wars-round-II

    Again, great summary!

    PS – Thomas J. DiLorenzo wrote a nice piece a few years back for the Cato Institute regarding predatory pricing titled: “The Myth of Predatory Pricing” that can be assessed here: http://www.cato.org/pubs/pas/pa-169.html

  4. Gerry says:

    I’m in town to visit my son (an NYLS student) and we were near MACYs yesterday and decided to walk over to check out this pizza. We couldn’t get a seat at either place.

  5. […] NYLS students examine NYC’s pizza wars on the School’s Legal As She Is Spoke (LASIS) blog, which reports on the state of legal journalism. http://nylssites.wpengine.com/lasisblog/2012/04/24/pizza-wars/ […]

  6. […] Pizza warsLegal as she is spokeDrew Carroll and Nadia-Elysse Harris, (24/04/12) […]

  7. It’s really an awesome as well as useful part of info. I’m happy that you choose to provided this useful information around. Be sure to keep all of us well informed this way. Appreciation for sharing.

Leave a Reply


nine − 4 =