External Factors: Government Regulation

Marketers must be aware of regulations that impact how price is set in the markets in which their products are sold. These regulations are primarily government enacted meaning that there may be legal ramifications if the rules are not followed. Price regulations can come from any level of government and vary widely in their requirements. For instance, in some industries, government regulation may set price ceilings (how high price may be set) while in other industries there may be price floors (how low price may be set).

Additional areas of potential pricing regulation of concern to marketers include such issues as:

  • Deceptive Pricing – When the method of pricing misleads customers into believing the price is lower than what they actually pay.
  • Price Discrimination – When a seller deliberately charges some customers a different price than other customers without a valid reason for doing so.
  • Predatory Pricing – When a seller intentionally sets price low to drive competitors from the market.
  • Price Fixing – When two or more parties (e.g., competitors) agree on a price to charge within a market for similar products.

Finally, when selling beyond their home market, marketers must recognize that local regulations may make pricing decisions different for each market. This is particularly a concern when selling to international markets where failure to abide by regulations can lead to severe penalties. For example, countries may institute tariffs on products shipped into the country. Often these tariffs are intended to protect domestic industries by raising the final selling price of product for the importing company. Consequently, marketers must have a clear understanding of regulations in each market they serve.