CPP Legal & Ethical Considerations in Pricing 2 — Questions and Answers
Question 1: Under the Robinson-Patman Act, a seller can legally charge different prices to competing buyers if which condition is met?
- The seller has more than 50% market share
- The price difference reflects a cost justification (Correct answer)
- The buyers are in different states
- The seller notifies the FTC in advance
Correct 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.
Question 2: Which type of pricing agreement between a manufacturer and retailer is most likely to be considered illegal resale price maintenance?
- Suggesting a minimum advertised price without enforcement
- Refusing to sell to discounters who cut prices below a specified floor (Correct answer)
- Offering volume discounts to high-volume retailers
- Publishing a recommended retail price list
Correct 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.
Question 3: 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:
- Penetration pricing
- Predatory pricing (Correct answer)
- Price skimming
- Competitive parity pricing
Correct 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.
Question 4: The ethical principle of 'price transparency' in B2B pricing primarily requires that:
- All competitors can see your price list
- Customers understand the components and rationale behind their pricing (Correct answer)
- Prices must be published publicly
- Government regulators review pricing formulas annually
Correct 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.
Question 5: Which scenario most clearly illustrates bid-rigging in a procurement context?
- Two firms independently submitting similar bids based on market rates
- Competitors coordinating to submit a losing bid so a designated firm wins the contract (Correct answer)
- A firm submitting a higher bid when it lacks capacity to fulfill the contract
- A buyer requesting multiple bids to compare pricing
Correct 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.
Question 6: Under US law, which of the following is generally treated as a per se violation of antitrust law?
- Charging different prices in different geographic regions
- Horizontal price-fixing among direct competitors (Correct answer)
- Offering loyalty discounts to long-term customers
- Adjusting prices in response to competitor moves
Correct 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.
Question 7: 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:
- Utilitarian ethics
- Fairness and non-discrimination principles (Correct answer)
- Free-market economics
- Price elasticity theory
Correct 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.
CPP Legal & Ethical Considerations in Pricing 2
Under the Robinson-Patman Act, a seller can legally charge different prices to competing buyers if which condition is met?