Legal and Ethical Constraints Flashcards

A pricing professional discovers her company's dynamic pricing model charges higher prices to users in lower-income zip codes for the same product. This practice most likely raises concerns under:

Answer: Fair Housing Act and consumer protection laws prohibiting proxy discrimination

Using zip codes as a proxy for race or income in pricing can constitute illegal discrimination under the Fair Housing Act and related consumer protection statutes.

Which of the following best illustrates 'parallel pricing' that does NOT rise to the level of illegal collusion?

Answer: Two firms independently raise prices in response to the same commodity cost increase

Independently responding to the same market conditions (e.g., cost increases) with similar price adjustments is lawful conscious parallelism, not illegal collusion.

The Pricing Professional's Code of Ethics typically requires 'objectivity.' In the context of a pricing analysis, objectivity means:

Answer: Basing recommendations on data and rigorous analysis rather than personal or organizational bias

Objectivity requires that pricing recommendations be grounded in sound analysis and evidence, free from pressure to reach a predetermined conclusion.

A distributor sells to both retail chains and independent retailers. She charges the retail chains 15% less. Under Robinson-Patman, this is most clearly problematic if:

Answer: The independents and retail chains compete for the same end customers in the same market

Robinson-Patman's secondary-line injury theory applies when buyers receiving different prices compete with each other, giving the lower-priced buyer a competitive advantage.

A software company bundles its dominant operating system with its own browser and prices the bundle at the same price as the OS alone, effectively giving the browser away. This may raise antitrust concerns primarily under:

Answer: Sherman Act Section 2 monopoly leveraging or attempted monopolization

Using dominance in one market to foreclose competition in a related market through bundled pricing can constitute monopoly leveraging under Sherman Act Section 2.

When a company voluntarily self-reports an antitrust pricing violation to the DOJ under the Corporate Leniency Program, the primary benefit is:

Answer: Avoiding criminal prosecution for the company and cooperating individuals if it is the first to report

The DOJ's Leniency Program grants the first company to self-report a cartel violation (and cooperate fully) immunity from criminal prosecution.

A company's pricing policy requires all salespeople to obtain manager approval before offering any discount exceeding 10%. From a legal and ethical standpoint, this policy primarily serves to:

Answer: Create an audit trail that ensures discounts are not given discriminatorily in violation of Robinson-Patman

Discount approval policies create documentation demonstrating that discounts are granted based on legitimate business criteria, reducing Robinson-Patman discrimination risk.