Pricing and Profitability Management: A Practical Guide for Business Leaders

Navigating Regulatory Environments When Making Pricing Decisions

Regulations vary considerably across geographical boundaries at both national and regional levels. State, federal, and international laws can present considerable challenges to firms when they implement pricing programs and structure transactions. For this reason, firms must seek regulatory interpretations from their legal counsels before making any major pricing decisions.

In general, regulations affecting pricing fall into four major categories: international and domestic trade agreements, restrictions, and certifications; collusion and price fixing; bundling; and price discrimination. All the laws influencing regulation cannot practically be cited here, but we touch on the general principles in the following.

International and Domestic Trade Agreements

Regulations affecting sales price present the greatest issues flowing from international trade agreements. Taxation, tariffs, and transfer prices have already been addressed in this chapter. Companies must, however, evaluate the impact of product costing and trade agreements when considering pricing. In the health care and defense industries, for instance, the U.S. government has a best price requirement for its purchases. This requires analytics and oversight to understand the impact of favorable prices earned through discounts to large customers, so that these prices do not inadvertently trigger a requirement to lower the price offered to the federal government. ...