Expert's Panel

A collection of timely and important topics posed to our panel of experts.

In regard to pricing, it is becoming more of an industry practice for OEMs to meet and share pricing about components they buy from suppliers in order to obtain better prices and therefore be more competitive against the industry leader. What, if any, legal aspects does this violate?

 (ep1071)
1. I'm not aware of it being officially done. I guess it might be happening. If it's happening, it is probably happening quietly. I do know for a fact that there are generalities talked about, from time to time, about equipment companies—people have their favorite ones and complain about others.
2. The question indicates that the companies participating in this are collaborating so they can be more competitive against the industry leader. This is collaboration to stifle competition, which is illegal. But . . . how do you prove it? Further, if you decide to undertake a legal battle against these customers, you may well become a pariah in the industry.
3. Here's why it's illegal—you have three companies that make a coil that goes into a piece of equipment. Company A and company B go together to arrange their pricing so they share that business and have a bigger market share, and they harm the other company. That's called collusion and it is against the Taft-Hartley Act and the Robinson-Patman Act. It is a clear violation.
4. Those acts were set up to protect the buyer's from collusion on the part of the sellers and the situation we are describing here is collusion amongst the buyers. This may mean it isn't illegal, but you still would have to figure a way to deal with it. Where is the smoking gun, and am I willing to go to court against my customers.
5. Beyond the legality issue is the issue of successfully dealing with the situation. If you are faced with this, look for quantity or some other leverage point. Then respond : "we can meet that price providing you do such and such which would allow for the discount." That's called negotiation.
6. Just one last word—if customers were to band together and negotiate one large, price-advantaged contract with the supplier that's perfectly legal. That is called cooperative buying.