A Quick Legal Guideline of Fixing or Controlling Resale Price from Anti-Trust Law Enforcement Perspective: Specific Do and Don’t

Following the article we published 2 weeks ago in which we aim to set forth the general position and some basic concepts in the ever changing and non-intuitive subject matter of price fixing of anti-trust laws. This week we take a further step to offer a more detailed “do-and-don’t” practical guidance in a reader-friendly form. We sincerely hope that the following would help to achieve full compliance with Chinese anti-trust laws.

 

  1. Offer Pricing Suggestion

 

Do: Offer suggestions to your downstream distributors / customers and discuss the implications. Provide conspicuous and strict disclaimer “All business decisions such as resale / retail price of the products, shelf displays and promotion shall be subject to the final, complete and sole discretion of the Customer” in all written documents containing resale price suggestion.

 

Don’t: make pricing decisions for your downstream distributors / customers. DO NOT control, coerce, agree, conspire or in any way consent or align with customers about resale price. DO NOT use confusing or misleading phrases such as “align / agree”, “manage”, “establish”, “maintain”, “coordinate”, “control” or “alliance”, etc.

 

  1. Explain Underlying Rationale for Suggested Pricing

 

Do: Legitimate rationale normally include: sales status of competitive products in the market, our suggested retail prices and underlying calculation rationale, the impact on consumer’s purchases arising from prices changes of certain hot items, price sensitiveness of consumers from diversified sales regions nationwide, etc.

 

Don’t: Do NOT coerce or require customers by penalties to implement our suggested price. (Please refer to our last article about the concept of coercion and penalties). Do Not tell your downstream distributors / customers the specific pricing decisions of another customer of ours for the purpose of selling in our suggested pricing.

  1. Discussing the Pricing of Others

 

Do: It is generally acceptable to point out that the overall market price may increase or decrease and explain the rationale objectively.

 

Don’t: discuss with customer about the future pricing decision of another distributors or customer of yours, not to mention calling out the name of the specific distributors or customer, specific pricing or implementation timetable.

 

  1. Complain of One Customer Against The Others

 

Do: Listen to any distributors or customer’s complain about pricing of another distributors or customer and assure your company understand the facts behind such complain.

 

Don’t: commit or promise to raise the issue to the customer being complained or “solve such issue together with them”.

 

  1. Sensitive Information Firewall

 

Do: Any documents involving pricing of specific product of different customers shall only be circulated internally among relevant employees (including their direct managers) responsible for the said customers. Other personnel should only be shared with the overall market pricing information without specific product’s pricing information.

 

Don’t: For and among other personnel not responsible for the said customer, documents involving pricing of specific product of the said customers shall not be shared or circulated nor be used to impose pressure internally or upon customers

 

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Please note that this article is not contemplated to exhaustive or be relied upon as formal legal advice. Should you wish to know more about the details of this particular area of law, please send an email to j.cao@pricecao.comand we would be more than happy to hear from you.

 

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