Government Regulations Affecting Price Martin Williams EMKT 6110 Dr. Elaine Adams
Objectives • Define Price • Gain an understanding of the factors that affect price • Discuss the importance of government regulations on price • Discuss and define 6 pricing issues that the government regulates • Name important regulation and laws related to price • Discuss enforcement • Discuss the importance of competition in our economy
Review what we already know • What is Price? • The value of money (or its equivalent) placed on a good or service • Dependent on the “Value” a customer places on the product • The right price is: Whatever the customer is willing to pay!
Price is an important factor in the success or failure of any business. When the price is right, everyone is happy!
Price helps maintain: • Image • Competitive Edge • Profit
Price affects consumer perceptions • Higher price sometimes equals better quality and upscale store • Lower price sometimes equals lower quality but usually means a bargain
Other factors affecting price • Cost and expense of producing and servicing product • Competition in the market • Supply and demand for the product • and…….
Government Polices and Laws
Consider these Issues • Price-Fixing • Price discrimination • Resale price maintenance • Minimum Pricing • Unit Pricing • Price Advertising
Price Fixing • When competitors agree on certain price ranges • Must be evidence of collusion (Communication between competitors) • Illegal because harms competition
Always Remember Competition is the Cornerstone of : The Free Enterprise System
Price Discrimination • When different prices are charged to similar customers in similar situations • Unfair for small competitors as well as consumers
Resale Price Maintenance • When Manufacturers force Retailers to sell for a certain price • Nine West Shoe Company recently fined • Government says this is a restraint on trade and anti-competitive
Minimum Pricing When Retailers sell below cost to drive competitors out of business
Unit Pricing • Consumers must be given the opportunity to compare prices in relation to a standard unit or measure • Food or packaged goods must be labeled properly
Price Advertising • Forbid advertising a price reduction unless original price was offered to the public • Cannot say your prices are lower than competitors without proof • Bait-and-Switch is illegal
Important Regulations Affecting Price • The Clayton Antitrust Act-covers price discrimination • The Sherman Antitrust Act covers price fixing • The Robinson-Patman Act covers both price discrimination and price fixing
Government Regulates Unfair Trade Practices • The Federal Trade Commission • The Justice Department • Local Communities / Better Business Bureau
The Federal Trade Commission Works to ensure markets are efficient and free of restrictions that harm consumers
Competition among Businesses • Creates the lowest prices • Causes innovation and creativity in product selection and product quality • Strengthens the economy
Markets work best when… • Consumers make informed choices • Based on accurate information
Review • Price is the value of money placed on a good • Several factors affect price : cost / competition / supply and demand / government policy • Various antitrust laws promote competition and outlaw unreasonable restraints on trade • Federal Trade Commission and Better Business Bureau enforce and inform regulations of businesses • Competition makes economy strong and works to the consumers advantage