Welcome to the newest installment of our weekly blog series, Ethical Questions for Marketers. Each week we plan to introduce a new topic and explore it in detail, preparing marketers for the day when they face such a problem at their organization.
Last week’s topic was Customer Privacy.
This week’s topic: Price Collusion
Let us start by stating that there is often overlap between ethical issues and legal ones. And this week’s topic falls into both categories. Collusion is illegal. But just because something is illegal does not mean companies don’t do it. And often these things are not enforced or prosecuted with any real vigor, so it is up to the ethical business managers among us to be true to our customers.
Price collusion refers to the act of agreeing with other competitors in your market to set prices at or above a certain level. Often, the reason for this is to prevent a price war and artificially increase prices and profits.
Obviously, the losers in collusion are the customers. They end up paying higher prices than they would under normal competitive conditions. Hence the illegality of this behavior.
To be clear, there is nothing illegal about pricing your offering at or near your competition. In fact, this is one of the most common strategies that companies use in pricing their products. The key difference between this and collusion is actual contact and agreement between companies.
While it is your job as a marketer to maximize sales, and often that means setting prices as high as possible without lowering demand, it is important not to cross the line and establish a price floor in the marketplace, hurting consumers in the process.
Stay tuned next week for another installment of our Ethical Questions for Marketers series. If you have an ethical topic you’d like to see addressed, write us.