Pricing Issues Revealed
Pricing – one of the most difficult things to get right. Commercially, if the price is too high, sales may drop away. Sell too cheaply and we de-value our brand and miss out on profit… So we often look at what our competitors are charging so as not to price ourselves out of the market.
When business people get together, conversation often starts with “How’s business?” and sometimes wanders onto a subject that is potentially dangerous indeed – pricing.
The Competition and Consumer Act 2010 (Cth) makes it an offence for a business to enter into a contract, arrangement or understanding that fixes price, or any aspect of price.
While many business people might be savvy enough not to enter into a formal agreement with a competitor about price, many do not know that the law prohibits arrangements and understandings too; the so-called “wink and a nod” deal.
So… if you get around to discussing prices with a competitor, and subsequently your pricing falls into line with your competitor’s pricing, you may be in for a world of pain – a cartel offence, fines potentially exceeding $10 million and even gaol.
It is one thing to find out what competitors are charging (which you are allowed to do); but it is quite another to have actual discussions or correspondence with them about prices – the ACCC, may perceive you to have entered into an illegal contract, arrangement or understanding. So, the golden rule is: Don’t discuss prices with competitors!
