The pricing component of the marketing mix is the focus of regulation from two perspectives: price fixing and price discounting. Although the Sherman Act did not outlaw price fixing, the courts view this behavior as per se illegal (per se means “through or of itself”), which means the courts see price fixing itself as illegal.
Certain forms of price discounting are allowed. Quantity discounts are acceptable; that is, buyers can be charged different prices for a product provided there are differences in manufacturing or delivery costs. Promotional allowances or services may be given to buyers on an equal basis proportionate to volume purchased. Also, a firm can meet a competitor’s price “in good faith.” Legal and regulatory aspects of pricing are covered in more detail in Chapter 14.
The government has four concerns with regard to distribution—earlier referred to as “place” actions in the marketing mix—and the maintenance of competition. The first, exclusive dealing, is an arrangement a manufacturer makes with a reseller to handle only its products and not those of competitors. This practice is illegal under the Clayton Act only when it substantially lessens competition.
Requirement contracts require a buyer to purchase all or part of its needs for a product from one seller for a time period. These contracts are not always illegal but depend on the court’s interpretation of their impact on distribution.