§ Rav Huna said: There was a certain resident of an alleyway who set up a mill in the alleyway and earned his living grinding grain for people. And subsequently another resident of the alleyway came and set up a mill next to his. The halakha is that the first one may prevent him from doing so if he wishes, as he can say to him: You are disrupting my livelihood by taking my customers. The Gemara suggests: Let us say that a baraita supports his opinion: One must distance fish traps from fish, i.e., from other fish traps, as far as the fish travels, i.e., the distance from which the fish will travel. The Gemara asks: And how much is this distance? Rabba bar Rav Huna says: Up to a parasang [parsa]. This indicates that one must distance himself from the place where another has established his business. The Gemara responds that this is no proof: Perhaps fish are different, as they look around. One fish explores the area ahead of the others, indicating to them where to go. Once they encounter the first trap they will not approach the second. Ravina said to Rava: Shall we say that Rav Huna spoke in accordance with the opinion of Rabbi Yehuda? As we learned in a mishna (Bava Metzia 60a): Rabbi Yehuda says: A storekeeper may not hand out toasted grain and nuts to children who patronize his store, due to the fact that he thereby accustoms them to come to him at the expense of competing storekeepers. And the Rabbis permit doing so. This indicates that according to the opinion of Rabbi Yehuda, all forms of competition are prohibited, which would include the scenario concerning the mill. The Gemara rejects this suggestion: You may even say that Rav Huna holds in accordance with the opinion of the Rabbis. The Rabbis disagree with Rabbi Yehuda only there, as the storekeeper can say to his competitor: If I distribute walnuts, you can distribute almonds [shiyuskei]. But here, with regard to a resident of an alleyway who sets up a mill in that alleyway where another mill already exists, even the Rabbis concede that the owner of the first mill can say to him: You are disrupting my livelihood, as beforehand whoever required grinding came to me, and you have provided them with another option. The Gemara raises an objection from a baraita: A man may establish a shop alongside the shop of another, and a bathhouse alongside the bathhouse of another, and the other cannot protest, because the newcomer can say to him: You operate in your space, and I operate in my space.
...וע' לקמן סי' רכ"ז שני בני אדם הדרים ביחד והאחד רוצה להוזיל בהלוואת הרבית לעובדי כוכבים אין חבירו יכול למחות בו (רבי' ירוחם נ' כ"א ח"ו) וה"ה בכל כיוצא בזה ועיין לקמן סימן רכ"ח סעי"ח:
(5) .....Gloss... See ahead ~227 that if two people dwell together (in one jurisdiction) and one wants to lower his fees for loans his competitor cannot stop him. So too, in all similar cases. See also, ~228:18
(יח) מותר לחנוני לחלק קליות ואגוזים לתינוקות כדי להרגילם שיקנו ממנו וכן יכול למכור בזול יותר מהשער כדי שיקנו ממנו ואין בני השוק יכולים לעכב עליו (וע"ל סי' קנ"ו ס"ה):
(18) A storekeeper may hand out toasted grain and nuts to children to accustom them to come to him. He may sell for less than the market rate, as well, so that buyers come to him. The marketers may not stop him. (See above ~156:5)
(יד) מותר לחנוני לחלק קליות ואגוזים לתינוקות כדי להרגילם שיקנו ממנו ואין שארי חנונים יכולים למחות בו ומי ימחה בידם לעשות כן דרשות ביד כל אחד לעשות איזה השתדלות לפדיון כמו שמבקש מאנשים שיקחו ממנו אבל מחנותו של אחר אין לקרות שום קונה ועובר בלא תסיג גבול וכן יכול למכור בזול ואין בני השוק יכולים לעכב עליו אמנם נ"ל דזהו רק בתבואה מפני שע"י זה שימכור בזול גם האחרים ימכרו בזול ומתוך זה ימכרו בעלי האוצרות בזול [רש"י שם] אבל לזלזל במכירת סחורה איסור גמור הוא ומתוך כך מקולקל דרך המסחר ומאבדין מעות אחרים [וראי' מב"ב צ"א.] וכן מצאתי לאחד מהגדולים שכתב כן וגם לעשות איזה הערמה שיפדה יותר משמע קצת מגמרא שאסור ואינו מותר לעשות רק דבר שגם האחר יכול לעשות כן [מדפריך שם מ"ט דרבנן]:
(14) A storekeeper may hand out toasted grain and nuts to children to accustom them to come to him. No one can condemn such action? Everyone can do any effort to sell, such as asking people to buy from him. However, he may not ask people to come to him if they are at a competitors shop. That is a transgression of encroaching (on another property boundry). He may sell for less than the market rate, as well, so that buyers come to him. The marketers may not stop him. However, it seams to me, that this is only true with produce. That is, because it will bring down the price and force the storehouses to sell for less (Rashi). Yet it is completely forbidden to cheapen the price of merchandise. This would destroy the ways of commerce and cause others to loose their money (proof can be found in Bava Batra 91a). I have found one of the greats that has written so. Also, to create a scheme that people buy for more, it seems in the Gemara, is forbidden. Only that which the other can also do, is permitted to be done (from the way the Gemara there asks for the reason of the Rabbis opinion).
Even if/when a seller is generally permitted to undercut his competitors, this only true if he is selling within his sale ability. However, predatory pricing, where a seller sells at a loss in order to force the destruction of a competitor, is prohibited under the rubric of midas Sedom (pointless conduct, where one behaves in a manner that is technically within his rights, but the course of conduct has negative repercussions for someone else without benefit to himself). This is prohibited even if the motivation is actually self-interest, such as if he intends to extort money from the competitor in order to cease his harassment, or to force the competitor to enter into a partnership with him, since conduct that is inherently midas Sedom is not legitimized by the motivation of extortion.