Ethics and the Law February 27

Levels of Ethical Pricing “Buyer Beware” “Full disclosure” No “exploitation” Cost justification “from each according to his/her skills, to each according to his/her needs”

Rights vs Responsibilities Is it legal? Is it right? Government involvement in pricing –Price controls –Specific prohibitions –Fostering competition or competitors –Goal vs action

Laws Sherman Antitrust (1890) –Protects competition –Treble damages –Per se vs rule of reason Horizontal price fixing (motivation important—may not agree to …) Resale price maintenance –Suggested retail, drop distributors, volume quotas

Price Discrimination Different prices for… Different customers of… Goods… Of Like quality creating… Competitive injury. Defenses –Cost justification –Meeting competition –Changing conditions

Miscellaneous Promotion –Allowances, services, facilities in… –Connection with resale… –Not available to all competing customers. Rule of reason for managing distribution channel: –Customer, Territory, or Product restrictions Predatory pricing