Pricing Laws Positive effects of pricing laws: Customers know that they arent being taken advantage of and

pricing is consistent Negative effects of pricing laws: Prices become less likely to be modified (even down) because the law might see the change in a negative manner. . !eceptive Pricing " #alse advertising or deceptive advertising is the use of false or misleading statements in advertising. $s advertising has the potential to persuade people into purchases that they might otherwise avoid. %&: 'special' sales( 'two)for)one' sales( 'factory' prices( or 'wholesale' prices. a. #ederal *rade Commission (#*C)) sets price advertising guidelines forbidding a company from advertising a price reduction unless the original price was offered to the public on a regular basis for a reasonable and recent time b. $lso companies must show proof that they are cheaper than the competition if they advertise this fact c. $lso premarked or list prices may not be used as a comparison price unless the item was actually sold at that price +. ,ait)and)-witch $dvertising )) #irst( customers are 'baited' by advertising for a product or service at a low price. second( the customers discover that the advertised good is not available or the sales person disparages the advertised item and customers are 'switched' to a costlier product. a. #ederal *rade Commission (#*C)) also outlaws this /. 0oss)0eader Pricing " a product sold at a low price (at cost or below cost) to stimulate other profitable sales. 1t is a kind of sales promotion( in other words marketing concentrating on a pricing strategy. $ loss leader is often a popular article. a. 2any states have adopted minimum price laws to prevent retailers from selling goods below cost 3. Price !iscrimination " occurs when a firm charges different prices to similar customers in similar situations a. Clayton $ntitrust $ct of 4 3) defines price discrimination as creating unfair competition b. 5obinson)Patman $ct) passed in 4/6 to strengthen the Clayton $ct( prohibits sellers from offering one customer one price and another customer a different price if both are buying the same product in similar situations 7. Price #i&ing )) is an agreement among competitors to raise( fi&( or otherwise maintain the price at which their goods or services are sold( price fi&ing is illegal. a. -herman $ntitrust $ct of 849) federal law against price fi&ing( which outlawed monopolies
6. Predatory Pricing -- is the practice of selling a product or service at a very low price( intending to drive

competitors out of the market a. -herman $ntitrust $ct of 849) also outlaws this :. !umping )) is the practice of is any kind of predatory pricing( especially in the conte&t of international trade. 1t occurs when manufacturers e&port a product to another country at a price either below the price charged in its home market( or in ;uantities that cannot be e&plained through normal market competition. a. $nti)!umping 0aws) protect against this (have been opposed by some because it prohibits competition from foreign companies( thus making consumers pay higher prices) b. -herman $ntitrust $ct of 849) also outlaws this 8. 5esale Price 2aintenance) manufacturers try to force retailers to sell their products at a certain price( and if the retailer dropped the price too low( the manufacturer would punish the retailer by withholding merchandise or refusing agreed upon discounts a. Consumer <oods Pricing $ct) passed in 4:7 to outlaw this practice of punishing retailers

What Type of Pricing? !irections: 5ead each of the following situations and decide which type of pricing from above was used and what law from above protects against it. (Note: there is only one of each type used) . #ord brought their new car over to =apan and sold it way below =apans usual car prices. a. >hat type of pricing is this? @@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@ b. >hat law protects against this? @@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@ +. Nike contacted #oot 0ocker because they heard that #oot 0ocker was selling their tennis shoes below the manufacturers suggested retail price. a. >hat type of pricing is this? @@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@ b. >hat law protects against this? @@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@ /. 2c!onalds advertised that they had the cheapest burgers in town( when really ,urger Aings were cheaper. a. >hat type of pricing is this? @@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@ b. >hat law protects against this? @@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@ 3. $ll of the local gas stations got together and decided to raise the price of gas( and they must each stay between B3.99)B3.+7 per gallon. a. >hat type of pricing is this? @@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@ b. >hat law protects against this? @@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@ 7. =CPennys advertised a winter coat for B79( but when a customer came in looking for the coat in the advertisement( they were told this item was not in stock( but they could purchase this other coat for B:7. a. >hat type of pricing is this? @@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@ b. >hat law protects against this? @@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@ 6. 1n a small town( there were only five grocery stores and one of them dropped their prices so low that the other four stores went out of business. a. >hat type of pricing is this? @@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@ b. >hat law protects against this? @@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@ :. >al)2art was looking for a new manufacturer of mayonnaise to carry in their stores and when they contacted Celmans( they were told each case would be B+9( while Celmans charged a local deli B+7 per case. a. >hat type of pricing is this? @@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@ b. >hat law protects against this? @@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@ 8. #ood 0ion dropped the price of the new !iet Coke to :7 in order to draw in customers in hopes that they would make up for this price reduction by the customers purchasing other products as well. a. >hat type of pricing is this? @@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@@