• What are the major public policy issues in pricing?
  • There are several known issues when considering public policy and pricing. The first is price-fixing. Price-fixing states, “that sellers must set prices without talking to competitors.” (Kotler & Armstrong, 2019) Its stating that they need to come up with prices for their products or services based on what they think their product/service is worth, not based on what competitors are charging for their similar products or services. Also, price fixing isn’t just concerning the cost of the product or service itself. It also can involve things like, shipping fees, warranties, discount programs or financing rates. (Price fixing, 2017) The next issue is predatory pricing. Predatory pricing is, “selling below cost with the intention of punishing a competitor or gaining higher long-run profits by putting competitors out of business.” (Kotler & Armstrong, 2019) There are factors that have to be at play for selling below cost to be considered predatory pricing. Simply putting items on sale to decrease or turn inventory is not considered predatory pricing. Next is price discrimination. Price discrimination is defined as, “ensuring that sellers offer the same price terms to customers at a given level of trade.” (Kotler & Armstrong, 2019) Price discrimination protects smaller retailers from being charged differently than a larger retailer and vice versa. However, certain factors can take effect and situations will arise where smaller retailer will receive a different cost than the larger if one is buying more stock. I believe this is called buying in bulk. Another issue is retail (or resale) price maintenance. “A manufacturer cannot require dealers to charge a specified retail price for its product.” (Kotler & Armstrong, 2019) So, I work for Owens Corning, what this does is say that we can not require our distributors to sell our products for a certain price. If we sell our product to Menards, Menards can resell the product for what they feel is competitive. Lastly, is deceptive pricing. Deceptive pricing is, “when a seller states prices or price savings that mislead consumers or are not actually available to consumers.” (Kotler & Armstrong, 2019) This is like Walmart saying on an advertisement that they have an item for sale for $5 when their competitor has it for sale for $10 but they really have it priced the same as Walmart.
• Does Amazon practice predatory pricing or just good competitive marketing?
  • I do not feel that they have predatory pricing. I think they have the means to have a competitive price with the advantage over their competitors. Amazon sells so many other items outside of just books. Maybe their tactic is they sell some of their other products at a little higher cost so that they are able to sell their books for less.

Resources:

Kotler, P., & Armstrong, G. (2019). Principles of marketing. Pearson Education.

Price fixing. Federal Trade Commission. (2017, December 15). Retrieved September 27, 2021, from https://www.ftc.gov/tips-advice/competition-guidance/guide-antitrust-laws/dealings-competitors/price-fixing (Links to an external site.).

Is Amazon guilty of predatory pricing? Truth on the Market. (2019, May 7). Retrieved September 27, 2021, from https://truthonthemarket.com/2019/05/07/is-amazon-guilty-of-predatory-pricing/

PEER 2

There are two major public policy issues when it comes to pricing, price-fixing, and predatory pricing. Price fixing is when multiple companies collude to increase their prices to gain higher profits (Kotler, 2020). The victim is the consumer who has to pay substantially more for a service or product. An example of price-fixing took place in the 1970s when the Organization of Arab Petroleum Countries (OAPEC) decided to reduce oil production across the board. The results were oil prices nearly quadrupled, and there was a severe shortage of oil supplies in the west (Hayes, 2021).

Predatory pricing sets your prices so low and below cost that it drives the competition out of business (Kotler, 2020). But as our textbook pointed out, the price has to be set low with the intent of ruining other companies. Proving that intent can be very difficult. For example, Walmart is known for bankrupting small local businesses when they move into town. Are they intentionally keeping their prices so low that they gain more business or eliminate the local competition?

I believe Amazon is guilty of predatory pricing. In 2010 a smaller online retailer called diapers.com was gaining popularity. Amazon unofficially tried to purchase the small vendor. When the vendor refused to sell, Amazon slashed their prices on diapers, other baby items and started Amazon Moms. The negotiators from Amazon told Diapers.com that Amazon would be willing to drive the cost of diapers all the way down to zero if they had to. In 2010 Diapers.com was bought by Amazon (What Happened to Diapers.Com?, 2021). I say yes, Amazon engaged in predatory pricing.

Hayes, A. (2021, August). What Is Fixing When Pricing a Product? Investopedia. https://www.investopedia.com/terms/f/fixing.asp

Kotler, P., & Armstrong, G. (2020). MyLab Marketing with Pearson eText for Principles of Marketing (18th Edition) (18th ed.). Pearson.

What Happened to Diapers.com? (2021, January 31). Aston Baby. https://astonbaby.com/what-happened-to-diapers-com/