Setting a price for your goods and services as a business owner comes with its own set of legal responsibilities.
Before you publicly display a price for your services or products, you need to make sure your business complies with certain regulations, so you don’t end up in legal hot water.
Make sure you are familiar with the following terms before advertising your pricing:
Recommended Retail Price
The Recommended Retail Price — commonly referred to as RRO — serves only as a recommendation to the re-seller. It is in no way mandatory, and it is 100% illegal for a vendor to put pressure on a wholesaler to sell their products at a particular price. It’s also illegal for vendors to make any sort of threats to intimidate re-sellers to comply with their pricing demands.
Comparative pricing is exactly what it sounds like — you compare the sale price of your product or service to a former price and/or to the price of your competitors. Comparative pricing is a top strategy to put your products in a position to beat the competition, but it can be a delicate line to walk. Check out this excellent article on the ins and outs of comparative pricing for businesses.
Multiple pricing usually happens by accident. Multiple pricing occurs when a good or service has more than one advertised price. If and when this happens, the business is required under consumer law to sell the product at the lowest price or remove the product from sale until the issue has been corrected and only one price exists for the item.
Unit pricing code
Unit pricing code refers to the price per unit calculated for a product using a solid measurement like grams or litres. It allows consumers to compare the cost per unit across multiple products and can be a great way to draw customers in if your price per unit is low. Online e commerce giant Amazon offers unit pricing on many of their products. And in Australia, the unit pricing code requires that grocery stores display unit prices on certain items for sale.
Price fixing is illegal in Australia and in most developed countries. It occurs when two or more competitors agree on setting prices, undermining the free market with deceptive business practices. Although price fixing is illegal, it is sometimes confused with parallel pricing which is totally legal and a legitimate way of doing business.
Parallel pricing simply involves following the pricing practices of other businesses or organizations, particularly competitors. It is a totally legal practice and can be a shrewd move to attract business. For example, if you have a similar product and notice that a competitor is outpacing you by lowering the price by 20%, you may try the same pricing scheme in an effort to get parallel results.
Different Payment Methods Pricing
Under the law, pricing a product differently depending on the payment method (e.g. credit card, cash, etc.) requires that you clearly label each price for transparency with consumers.
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