Legal & Ethical Considerations in Pricing Flashcards

Under the Robinson-Patman Act, a seller can legally charge different prices to competing buyers if which condition is met?

Answer: The price difference reflects a cost justification

Robinson-Patman allows price differences when they can be justified by actual cost differences in manufacture, sale, or delivery.

Which type of pricing agreement between a manufacturer and retailer is most likely to be considered illegal resale price maintenance?

Answer: Refusing to sell to discounters who cut prices below a specified floor

Resale price maintenance becomes illegal when a manufacturer enforces minimum prices by refusing to supply retailers who discount below that level.

A company sets prices below average variable cost in a market it dominates with the intent to eliminate a competitor. This is best described as:

Answer: Predatory pricing

Predatory pricing involves deliberately pricing below cost to drive out competitors, which is illegal under antitrust law when done by a dominant firm with intent to monopolize.

The ethical principle of 'price transparency' in B2B pricing primarily requires that:

Answer: Customers understand the components and rationale behind their pricing

Price transparency in B2B contexts means customers have enough information about pricing structure and rationale to make informed purchasing decisions.

Which scenario most clearly illustrates bid-rigging in a procurement context?

Answer: Competitors coordinating to submit a losing bid so a designated firm wins the contract

Bid-rigging occurs when competitors coordinate their bids to predetermine the winner, undermining the competitive bidding process.

Under US law, which of the following is generally treated as a per se violation of antitrust law?

Answer: Horizontal price-fixing among direct competitors

Horizontal price-fixing among competitors is a per se violation of the Sherman Act, meaning it is illegal regardless of its actual competitive effects.

A pricing manager discovers that the company's dynamic pricing algorithm has been systematically charging higher prices to customers in minority-majority zip codes. The primary ethical framework this violates is:

Answer: Fairness and non-discrimination principles

Systematically charging protected groups higher prices violates fairness and non-discrimination principles, and may also violate laws like the Fair Housing Act or state consumer protection statutes.