CPP Regulatory Framework & Compliance 3 — Questions and Answers
Question 1: Resale price maintenance (RPM) agreements between a manufacturer and its distributors are currently evaluated under which legal standard in the United States?
- Per se illegal rule
- Rule of reason (Correct answer)
- Quick-look analysis
- Strict liability standard
Correct answer: Rule of reason
Since the Supreme Court's 2007 Leegin decision, vertical minimum resale price maintenance is analyzed under the rule of reason rather than being per se illegal.
Question 2: Which type of price discrimination occurs when a company charges different prices to different customer groups based on their willingness to pay?
- First-degree price discrimination
- Second-degree price discrimination
- Third-degree price discrimination (Correct answer)
- Fourth-degree price discrimination
Correct answer: Third-degree price discrimination
Third-degree price discrimination segments customers into groups (e.g., students, seniors) and charges each group a different price based on demand elasticity.
Question 3: A company's pricing policy requires all sales reps to obtain management approval before offering discounts exceeding 15%. This is an example of:
- Predatory pricing control
- Price governance and delegation of authority (Correct answer)
- Bid rigging prevention
- Price floor regulation
Correct answer: Price governance and delegation of authority
Requiring management approval for discounts above a threshold is a price governance mechanism establishing delegation of authority in the pricing process.
Question 4: Under the EU's GDPR, how might personalized pricing based on individual browsing data create compliance risk?
- It violates Article 101 TFEU price-fixing rules
- It may breach transparency and lawful processing requirements for personal data (Correct answer)
- It constitutes predatory pricing under Article 102 TFEU
- It triggers mandatory price disclosure under consumer protection directives
Correct answer: It may breach transparency and lawful processing requirements for personal data
Using personal data to set individualized prices without adequate disclosure or lawful basis may violate GDPR's transparency and data processing requirements.
Question 5: In government contracting, the Truth in Negotiations Act (TINA) requires contractors to:
- Submit prices at or below market rate
- Provide certified cost or pricing data when contracts exceed the threshold (Correct answer)
- Disclose profit margins to the contracting officer
- Use only cost-plus pricing structures
Correct answer: Provide certified cost or pricing data when contracts exceed the threshold
TINA (now codified in 10 U.S.C. § 2306a) requires contractors to submit certified cost or pricing data for negotiated contracts above a specified dollar threshold.
Question 6: A retailer advertises a product as '50% off the original price' but the 'original price' was never actually charged to customers. This practice violates:
- Sherman Act Section 2
- FTC guidelines on former price comparisons (Correct answer)
- Robinson-Patman Act
- Clayton Act Section 7
Correct answer: FTC guidelines on former price comparisons
The FTC's guides against deceptive pricing prohibit fictitious former price comparisons where the reference price was not a genuine price at which the item was offered.
Question 7: Which of the following best describes 'zone pricing' in the context of regulatory compliance?
- Charging different prices in different geographic zones, which may raise antitrust concerns if it harms competition (Correct answer)
- A government-mandated pricing structure for regulated utilities
- Tiered pricing based on purchase volume within a distribution zone
- Setting prices based on freight and logistics costs only
Correct answer: Charging different prices in different geographic zones, which may raise antitrust concerns if it harms competition
Zone pricing charges customers different prices depending on geographic location and can face antitrust scrutiny if it facilitates price discrimination that harms competition.
CPP Regulatory Framework & Compliance 3
Resale price maintenance (RPM) agreements between a manufacturer and its distributors are currently evaluated under which legal standard in the United States?