Legal & Ethical Considerations in Pricing Flashcards

The concept of 'zone pricing' by fuel distributors has faced legal scrutiny primarily because it may:

Answer: Constitute price discrimination that harms competing buyers in higher-priced zones

Zone pricing can raise Robinson-Patman concerns when it results in competing retailers paying different wholesale prices, potentially disadvantaging those in higher-priced zones.

A SaaS company charges enterprise clients $50,000/year and small businesses $500/year for the same software. This pricing structure is most defensible under which legal/ethical rationale?

Answer: Value-based differentiation tied to differing value received and ability to pay

Charging different customer segments prices commensurate with the value they receive is a well-established and legally defensible pricing practice.

Which government agency has primary jurisdiction over deceptive pricing practices in US consumer markets?

Answer: Federal Trade Commission (FTC)

The FTC has primary authority to regulate unfair or deceptive acts and practices in commerce, including deceptive pricing under Section 5 of the FTC Act.

A retailer advertises a product as 'Was $200, Now $99' but the item was never actually sold at $200. This practice violates which pricing regulation?

Answer: FTC's Guides Against Deceptive Pricing

The FTC's Guides Against Deceptive Pricing specifically prohibit false reference prices or fictitious 'former prices' used to inflate the apparent savings.

In the context of CPP ethics, 'price gouging' most typically occurs when:

Answer: Sellers exploit consumer vulnerability during emergencies by charging excessive prices

Price gouging refers to exploiting emergencies or disasters to charge unconscionably high prices for essential goods, which is illegal in many US states.

Which of the following best describes the 'rule of reason' standard used in some antitrust pricing cases?

Answer: A court evaluates the actual competitive effects of a practice before ruling it illegal

Under the rule of reason, courts analyze the actual pro-competitive and anticompetitive effects of a practice rather than declaring it illegal per se.

A pharmaceutical company charges $50,000 for a drug in the US and $500 in a developing country. Which statement most accurately describes the ethical dimensions of this pricing?

Answer: It can be ethically justified if it enables broader access while sustaining R&D investment

International differential pricing can be ethically defensible when lower prices in low-income markets expand access while higher prices in wealthier markets fund continued R&D.