Legal & Ethical Considerations in Pricing Flashcards

A trade association facilitates meetings where member companies discuss 'industry pricing trends' using aggregated data. Which condition makes this activity most legally risky?

Answer: The data is recent, disaggregated, and could enable participants to coordinate future prices

Sharing recent, company-specific, or disaggregated pricing data through trade associations can facilitate implicit coordination and expose members to antitrust liability.

Under the FTC Act, an 'unfair' pricing practice is one that meets which legal standard?

Answer: It causes substantial consumer injury that is not reasonably avoidable and not outweighed by benefits

The FTC's three-part unfairness test requires substantial consumer harm, harm that consumers cannot reasonably avoid, and harm not offset by countervailing benefits.

A company introduces a 'most favored nation' (MFN) clause requiring buyers to notify it if they find a lower price elsewhere. Antitrust concern with MFN clauses is that they may:

Answer: Dampen competitive pricing by discouraging suppliers from offering lower prices to rivals

MFN clauses can reduce market-wide price competition by giving the protected buyer an incentive to report lower deals, which may discourage suppliers from offering competitive prices to others.

The Leegin Creative Leather Products v. PSKS Supreme Court decision (2007) changed antitrust treatment of resale price maintenance by:

Answer: Shifting minimum resale price agreements from per se illegal to rule of reason analysis

Leegin overturned the century-old Dr. Miles precedent and held that minimum resale price maintenance should be evaluated under the rule of reason rather than treated as per se illegal.

A pricing professional at a subscription software company learns that the company auto-renews annual contracts at a 40% higher rate without clear customer notification. The ethical action is to:

Answer: Flag the practice internally and advocate for proactive renewal notifications and transparent pricing

Ethical pricing practice requires advocating for customer transparency and fairness internally before escalating externally, as hidden renewal price increases damage trust and may constitute deceptive practices.

Which of the following pricing scenarios would most clearly qualify as 'tying' under antitrust law?

Answer: Requiring customers to purchase Service B as a condition of buying the dominant Product A

Tying occurs when a company with market power over a 'tying' product conditions its sale on the buyer also purchasing a separate 'tied' product, foreclosing competition in the tied market.

In ethical pricing, the concept of 'counterfeit reference prices' specifically refers to:

Answer: Advertising inflated 'original' prices that were never actually charged to create false impression of savings

Counterfeit reference prices involve fabricating or inflating 'before' prices in promotional comparisons, deceiving consumers about the magnitude of a discount.