What is vertical pricing?

Vertical price-fixing arrangements include agreements by manufacturers to set minimum or maximum resale (i.e., retail) prices for their products. Minimum resale price-fixing is often termed resale price maintenance.

What is vertical price?

Vertical price-fixing is when manufacturers and retailers work together to set a fixed price for a product, controlling its resale price. This is different from horizontal price-fixing, which is when competitors on the same level, such as retailers, agree to set a fixed price for a product.

What is the difference between horizontal and vertical price fixing?

Horizontal price fixing centers around agreements between competitors in which they agree to set prices at a certain level. Vertical price fixing is an agreement between firms operating at different levels of the same supply chain that sets prices at a certain level.

Is it illegal to fix prices?

The Sherman Antitrust Act

This law prohibits conspiracies that unreasonably restrain trade. Under the Sherman Act, agreements among competitors to fix prices or wages, rig bids, or allocate customers, workers, or markets, are criminal violations.

What is it called when companies work together to fix prices?

One of the most common ways of colluding is price fixing. Price fixing occurs when there are a small number of companies, commonly referred to as an oligopoly, in a particular supply marketplace. This limited number of businesses offer the same product and form an agreement to set the price level.

Sherman Act Vertical Price Fixing Maintenance

What is vertical price fixing might occur between?

Vertical resale price maintenance, which is an agreement on price between a manufacturer and its distributors (or a distributor and its retailers), may not be prosecuted criminally, although such agreements are “per se” unlawful, because of the difficulty of distinguishing between vertical price agreements and other ...

Is price fixing between companies illegal?

Price fixing is illegal because it's considered anti-consumer and anti-competitive. So, it's harder for other companies to enter the market and customers usually have to pay higher prices.

What pricing tactics are illegal?

What is the 28 day pricing rule?

If your business is comparing the price to your previous or usual price (including for volume promotions), then the previous price should have been the most recent price available for 28 consecutive days or more and comparisons should not be made with prices that were last offered more than six months ago.

What is dual pricing?

Dual pricing is the practice of setting different prices in different markets for the same product or service. This tactic may be used by a business for a variety of reasons, but it is most often an aggressive move to take market share away from competitors.

What predatory pricing means?

In most general terms predatory pricing is defined in economic terms as a price reduction that is profitable only because of the added market power the predator gains from eliminating, disciplining or otherwise inhibiting the competitive conduct of a rival or potential rival.

Is price a discrimination?

Price discrimination is a selling strategy that charges customers different prices for the same product or service based on what the seller thinks they can get the customer to agree to. In pure price discrimination, the seller charges each customer the maximum price they will pay.

What is an example of price discrimination?

Price discrimination occurs when consumers or groups of consumers are charged different prices even though the cost of providing the product or service to each consumer or each group of consumers is the same. For example, it would be price discrimination if a cafe offers a senior-citizen discount for its coffee.

Why is market division illegal?

According to the Federal Trade Commission, market allocation means: Plain agreements among competitors to divide sales territories or assign customers are almost always illegal. These arrangements are essentially agreements not to compete: “I won't sell in your market if you don't sell in mine.”

What are vertical retailers?

noun. (Retail: Outlets) A vertical retailer is a retail business that designs, produces, and sells its own products, without using middlemen or wholesalers, so that it can satisfy customer demands very efficiently.

What is vertical competition in retail?

Vertical competition happens along a channel or a value chain, where each stage of the channel or each contributor to the value chain takes a slice of the revenue pie — or extracts some other benefit for themselves — from the delivery of the final product or service to the consumer.

What is the rule of 3 in pricing?

The Rule of Thirds

I learned about it during my basic training with a few successful direct marketers, but it applies across the board as a recipe for publishing profitability: 1/3 to cost of product. 1/3 to marketing. 1/3 to overhead and profit.

What is the rule of 100 pricing?

He called this theory, “The Rule of 100.” Based on his research, he found that: A percentage discount off an item under $100 off will always look larger than the dollar discount. For example: 25% off of $75 appears larger than $18.75 off of $75.

Is it illegal to put a higher price over a lower price?

It's a criminal offence for sellers to give a misleading price indication about goods or services. That applies in whatever way the price indication is given, whether written in a notice or leaflet or given verbally.

What is destroyer pricing?

Destroyer pricing

It involves a business setting a very low price in order to attract customers away from competitors, who will struggle to match the low price and may go bust. Usually only large businesses can use this strategy as they can withstand the losses for a longer period than small businesses can.

What is unethical pricing?

However, segmenting prices based on race, gender, disability status, religion, or nationality can be unethical. Furthermore, pricing segmentation can even be illegal. Charging different customer groups different prices for identical products is unethical and may violate federal policy in the U.S.

What is aggressive pricing?

Originally Answered: What is aggressive pricing? Selling an item at a loss to increase footfall and impulse buying on the delusion everything in the shop must be cheaper .. Car and white good manufacturers often price aggressively to break into new markets.

How do you prove a cartel?

The most common forms of direct evidence are 1) documents (in printed or electronic form) that identify an agreement and the parties to it, and 2) oral or written statements by co-operative cartel participants describing the operation of the cartel.

What is a cartel price fixing?

Price fixing is an unlawful practice that occurs when a number of companies that would normally be expected to compete against each other conspire to artificially set market prices at a specific rate.

Is a monopoly illegal in the UK?

Are monopolies illegal in the UK? Monopolies are not illegal in the UK. However, it is illegal to engage in prohibited acts and abuse of monopoly power.