And the foreign companies try to persuade their clients they are actually based in the US (not abroad) so that they could charge as much as the companies that in fact are based in the US -- in order to enjoy bigger profits.
Sort of. Actually, it would be better if they were charging the same amount and pocketing the difference, although the quality of their work would still be bad. The foreign companies undercut the American companies and still make a huge profit. I charge $19.95 a page. One of my competitors is charging $9.95 a page. How do I compete with that? You cannot live for $5 an hour in the U.S.
Another thing they do is drive up the costs of advertising. Since they're not paying their writers, they can afford to pay Yahoo, Ask, and Google higher ad rates, which drives up the price for everyone.
There are other tactics too, but I think you get the point. The bottom line is they don't pay their people and their papers poorly written or just plagiarized.