Dennis Ellmaurer's - TEC Blog

Tuesday, December 21, 2010

Price Fixing 101



I was having lunch the other day at one of the trendy downtown hotel/restaurants. I was alone, sitting at the bar. A young man, probably born between 1965 and 1984, came in and asked to see the manager. The manager appeared. The two young men talked for a couple of minutes. I wasn’t intentionally eavesdropping, but I did overhear that the Xer who requested to see the manager was representing another trendy downtown hotel/restaurant.

The manager, also probably born between 1965 and 1984, brought the bartender into the conversation and finished by saying something like “give him all the information he wants.”

Next, the bartender, probably born after 1985, starts poking the touch screen on a near-by cash register. The Xer from the competing hotel was working from a list and asking the prices charged by drink by the trendy downtown hotel/restaurant. Grey Goose? $11.00. Check. Johnny Walker Red? $9.00. Check. Glenlivet? $13.00. Check. And on and on and on they went until they ran through the entire drink list of the trendy hotel/restaurant. Check.

The 111th Congress was still seated at the time, but I doubt it repealed the Sherman Act of 1890. This was horizontal price fixing, right there in front of my Caesar Salad. Simply exchanging prices with or without intent could have been a criminal offense if the exchange of pricing information affected the prices these two competitors set. Will the Xer manager who authorized the exchange, receive pricing feedback from his trendy downtown hotel/restaurant competitor? Check.

Generation X has been maligned for everything from an inability to consume enough to an arrogance that comes naturally to really smart, highly educated people. But somewhere behind these Xers was another trendy hotel/restaurant manager – a Boomer…who should have known better.

Rule of thumb. It is okay to talk to your competitors. Glean as much competitive information as you are able. But never talk about prices.