Antitrust laws attempt to prevent competitors agreeing on any matter that is in contravention of the capitalist position that each manufacturer, wholesaler and distributor should exercise independent business judgment in pricing products and choosing the markets in which it will compete. Agreements intended to affect pricing (whether it raises, lowers, or stabilizes) will always violate the antitrust laws, regardless of intention or impact. The laws prevent parties from sharing pricing information.
- The Sherman Act
- The Robinson-Patman Act
- The Clayton Act
Affecting pricing – or specifically, a seller charging various buyers different prices for the same product or discriminating in compensation for advertising – will likely be a violation of the Robinson-Patman act. Not all price discriminations are illegal, provided they reflect the different costs of dealing with different buyers (such as transport costs, competitive pricing from their own market, and availability of product). The government investigating a violation of the Robinson-Patman act must meet several legal requirements: it must concern a commodity or purchase, but not a service or lease; the goods in question must be of “like grade and quality;” there must be a likely injury or showing of harm; and the sale must be across the state line (normally). If defending an allegation of this kind of violation, one can assert two defenses: either the price difference is justified by different costs in the manufacturing, sale or delivery of the commodity (as discussed above) or the price differential was granted in good faith to meet or beat a competitor’s price. In some cases, even the buyer can be found to be in violation if there is evidence of the buyer inducing the seller to grant a discriminatory price.
Basic violations of the Robinson-Patman act include price differences in the sale of identical goods that are not justified on the basis of meeting or beating a competitor’s price or promotions that are not available to all customers. However, the major and most common defense against a suit with allegations of these violations is that the business was discounting prices in good faith in order to meet or beat competition. In order to show good faith, it’s best practices to document the specific facts that triggered a decision to decrease prices to a customer. Hiring general counsel in order to protect the company against inconsistent pricing practices can save time, money, and a major headache down the line against potentially disgruntled buyers.
Under no circumstances should the offer of a competitor be verified by calling that competitor. Any communication between competitors concerning prices can open the door to ‘price-fixing’ investigations by antitrust authorities, which is a felony involving up to ten years in jail. These kinds of schemes are often very difficult to detect and enforce, since most companies will not memorialize an agreement in writing, given the illegality of these actions. Further, price-fixing can take all kinds of shapes. Some of these schemes involve agreements to hold the prices at a certain level, establish a floor or ceiling on prices, adopt a standard pricing formula, not advertise prices, or adhere to a pricing schedule. These price fixing agreements are a per se violation of the Sherman act, meaning that defendants cannot introduce any evidence of justification for their conduct like changing market conditions. A professional attorney can provide guidance and advice on the convoluted laws concerning price-fixing and discriminatory pricing practices in the event you or your company fall under investigation for this behavior.