The Robinson-Patman Act

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Из курса от партнера University of Virginia

Market and Competition in Pricing Strategy

89 оценок

University of Virginia

Market and Competition in Pricing Strategy

89 оценок

Курс 3 из 4 — Specialization Pricing Strategy Optimization

If you haven’t considered what the competition is charging, you may not be maximizing your revenue. Spend time analyzing the market and you can influence price and improve margins. In this course, we'll show you how to implement competitive pricing and avoid common legal pitfalls of market-based pricing. You will also learn how to predict, influence and respond to competitors’ pricing moves. Led by Darden faculty and Boston Consulting Group global pricing experts, this course provides an in-depth understanding of market-based pricing and how to use it to capture more revenue.

Из урока

Understanding the Playing Field

Welcome! Competitive pricing is all about setting prices based on what companies with similar products and services charge. To use this approach effectively, you have to understand the playing field. In particular, you need to know general legal parameters that guide competition in the market place. In this module, you'll get basic background knowledge so that you can use market knowledge in your pricing strategy and still stay on the right side of antitrust law. Then Thomas will join you to introduce the competitive pricing framework , which you can use to assess pricing options, anticipate your competitors' pricing strategy, and determine whether to price to competition or to elasticity.

Legal Structures Related to Pricing4:02

The Sherman Antitrust Act4:25

The Clayton Act4:33

The Robinson-Patman Act3:50

Common Practices & Shifts in Interpretation6:19

Познакомьтесь с преподавателями

Jean Manuel Izaret
Senior Partner and Managing Director, Leader of BCG’s Global Pricing Practice
Ronald T. Wilcox
NewMarket Corporation Professor of Business Administration & Senior Associate Dean for Degree Programs
Marketing
Thomas Kohler
Associate Director, Pricing
Marketing, Sales & Pricing Practice

So now let's talk about the Robinson-Patman Act.

This is an act that was passed in 1936, so

some years after both the Sherman Antitrust Act and the Clayton Act.

It's really a refinement of the Clayton Act.

It makes price discrimination in B2B markets explicitly illegal.

The Clayton Act was kind of vague about that, but

the Robinson-Patman Act is very specific.

It says B2B markets, not allowed to do price discrimination.

It does, however, grant some exceptions, and these are important exceptions.

If you can prove cost differences in serving one business versus another,

then you're allowed to do price discrimination in B2B markets.

That is, you're selling to one company, your selling to another company, and

one company is just because they have better systems, or they're

buying in larger volume, it's just easier and less costly for you to serve them.

In that situation, the courts say yep, you're allowed to do price discrimination.

They also carved out another exception.

You're allowed to lower your price in order to meet a competitors price.

But that competitor must be servicing only a subset of the businesses that you serve.

For example, suppose you're selling hot sauce.

You're a national brand hot sauce manufacturer.

But in comes this new hot sauce in the state of Virginia., it's Ron's Hot Sauce.

And you're charging $2.59 for your hot sauce, but Ron's is selling for

$1.99, and it's just killing your business, everybody's buying Ron's sauce.

Well, you are allowed to go into that marketplace and drop your price, and

you don't have to drop it in other parts of the country or the world.

You can do it just in the state of Virginia if that's where Ron's Hot Sauce

is being sold.

Now, some cases, or a particular case that's of interest to the courts now.

Woodman's market versus the Clorox Company.

The background on this is that Clorox stopped supplying Woodman's market with

those larger sized packages that you often see perhaps at places like Sam's Club,

Costco, BJ's, etc.

For those of you who have shopped in those stores,

you know that sometimes you see sizes and packages

that are just much larger then what you're able to get at your local grocery store.

And the allegation in this case is that, Clorox's failure to allow Woodman's Market

to purchase these large size packages, constituted unlawful price discrimination.

Essentially, Woodman's saying, you're selling to Walmart or

your selling to Costco at a lower price than you're selling to us, because

you're offering these big discounts on this large sizes and that is unfair.

So that's an ongoing suit in the marketplace.

My overall impression of these cases is that they're difficult to win.

Now, again, you need to talk to an attorney in your organization about this,

not necessarily take my word exactly about which cases you're going to win and

which cases you're going to lose, because I'm not a legal expert.

But overall, my impression is it's tough to win these cases,

because courts broadly interpret the cost differences provision, and allow

these cost differences to make that B2B price discrimination essentially legal.

Now, what are the big takeaways?

The big takeaways are, don't charge different prices to different customers,

unless it can be justified based on cost differences, or

that price is needed to meet a local competitor's price.

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