Legal and Ethical Constraints Flashcards

Two companies meet at a trade association conference and agree not to bid below a certain price on government contracts. This is an example of:

Answer: Bid rigging, a per se antitrust violation

Bid rigging—agreeing with competitors on bids submitted to buyers—is a per se violation of the Sherman Act and is aggressively prosecuted by the DOJ.

Which of the following is NOT a recognized legal defense under the Robinson-Patman Act for charging different prices to competing buyers?

Answer: Increasing market share in a new geographic region

Market share growth is not a statutory defense under Robinson-Patman; recognized defenses are cost justification, meeting competition in good faith, and functional discounts.

A dominant firm charges different prices to different customer segments based on their willingness to pay. Under which condition does this become legally problematic?

Answer: When the price differences injure competition among buyers at the secondary line

Secondary-line price discrimination under Robinson-Patman is unlawful when it materially harms competition among buyers who compete with each other.

An industry leader publicly announces planned price increases well in advance. Competitors then follow with identical increases. This 'price signaling' may raise antitrust concerns because it:

Answer: Can facilitate tacit coordination without a formal agreement

Public price signaling can facilitate tacit collusion, which antitrust authorities scrutinize even absent a formal agreement, particularly in concentrated industries.

Under the CPP ethical framework, a pricing professional faces pressure to set an unusually high price on a life-saving drug to maximize short-term revenue. The most ethical course of action is to:

Answer: Raise the ethical concern with management and propose a value-based pricing alternative

Pricing professionals are expected to raise ethical concerns internally and propose alternatives that balance value capture with stakeholder fairness before taking external action.

Which of the following best describes 'zone pricing' and its primary legal risk?

Answer: Charging different prices in different geographic regions; risk is Robinson-Patman violations if buyers in different zones compete

Zone pricing charges different prices by geography; it risks Robinson-Patman liability when buyers in different zones compete with each other at the same trade level.

A pricing professional learns that her company's algorithm automatically matches any price reduction by a specific competitor within minutes. She is concerned this could facilitate tacit collusion. Her BEST next step is to:

Answer: Alert legal counsel to evaluate whether the algorithm's behavior raises antitrust concerns

Automated pricing algorithms can raise antitrust concerns if they facilitate collusive outcomes; the appropriate step is to engage legal counsel for a risk assessment.