Pricing Compliance: Four Legal Pitfalls Financial Leaders Should Avoid
Pricing of goods and services is the cornerstone of a company's financial success, but the process is becoming increasingly complex. Antitrust expert J. Wyatt Fore points out that financial leaders need to be familiar with antitrust laws and offers four practical recommendations: discuss pricing internally, be wary of tacit cartels, use competitive intelligence tools cautiously, and avoid restrictive clauses. Recent cases involving Live Nation and Apple highlight the trend of stricter enforcement.
Reasonable pricing of goods and services is one of the cornerstones of a company's financial success. However, this process has become increasingly complex: financial leaders now have more and more tools to track consumer and competitor behavior, enabling them to shape prices first and then adjust them in real time based on market dynamics.
J. Wyatt Fore is a partner at the law firm Shinder Cantor Lerner, specializing in antitrust matters. He believes that CFOs and other professionals involved in pricing must be familiar with antitrust laws to protect their organizations from potential future litigation risks.
"Enforcement has indeed intensified in recent years, and companies must remain vigilant when adopting pricing tools to ensure compliance with antitrust laws," Fore said in a recent interview.
Several recent cases have made headlines: last month, District of Columbia Attorney General Brian Schwalb announced that Live Nation, which owns Ticketmaster, will pay $9.9 million to settle allegations of misleading ticket pricing and charging deceptive fees. Meanwhile, according to CNBC, the U.S. Supreme Court on Wednesday declined Apple's request to pause a court order that found the iPhone maker in violation of its mandated changes to the App Store in an antitrust lawsuit brought by Epic Games.
Fore said companies should adopt a defensive mindset when developing pricing policy manuals and reminded professionals to keep four common-sense precautions in mind to ensure legal compliance.
- Limit price discussions to within the company.Fore emphasized never to discuss any details of product pricing directly with competitors, including planned production or sales volumes. Such casual conversations can occur at industry association events, conferences, or even informal social gatherings at country clubs. "I call it cartel behavior," Fore said, noting it could lead to price-fixing allegations. "I think they know this, but after a few drinks, it's easy to forget."
- Remember that cartels don't always look like cartels.Legally, any organization that agrees on pricing could constitute a cartel, and whether an agreement exists does not depend on whether it is signed in black and white. "An agreement can be verbal; a wink or a nod also counts," Fore said.
- Be cautious with any tool, algorithm, or platform that collects competitor information.Fore said that for some companies, depending on their position in the industry and whether they hold a dominant market position, this could constitute a warning sign.
- Do not impose restrictions.Fore noted that this could manifest as a company preventing customers from buying from competitors or switching suppliers in some way, or setting certain terms and conditions that require suppliers to sell goods at fixed prices.