Ethical Issues with Pricing

Pricing a product ethically is a major decision for any business. Businesses who use ethical pricing strategies to sell their products and earn a profit are far more respected than those that hurt and defraud competitors or even consumers. To practice ethical pricing, you need to be able to spot the ethical issues that hinder fair pricing.

An ethical pricing strategy goes beyond simply following the law. Similarly, not all unethical pricing strategies are fraudulent or illegal.Ethical decisions are difficult sometimes because there isn't a defined line for morally right and wrong decisions. As with many ethical problems in business, we need to take a step back, and view our decisions as a greater part of the business community, and set ethical standards for ourselves.

Pricing: More ethics than legality

There is a general consensus that marketing strategies must not infringe on values like honesty, transparency, and autonomy. As such, the main crux of pricing ethics concerns the establishment of a balance of power (through information) between the producer and the consumer. In a completely free market, producers often have the upper hand because they are in control of their products and processes. This potentially lead to unethical practices (using cheap or harmful materials, lying about benefits, etc.), which are deemed harmful for society as a whole.

Interestingly enough though, even with this possibility only a handful of pricing practices are regulated by the government, mainly because you're not really sure someone had broken a pricing law until you see results. For example, while predatory pricing, aka pricing extremely low to drive competitors out the market, is illegal, it's difficult to prove that the price decreases had such an intention and were not simply the result of competitor based pricing. It's like telling a child that he can have a cookie only if he finishes his vegetables, but with no way to discern if the kid ate the peas or if they were slipped to the dog. Essentially, most laws blindly attempt to curb motivations for doing things, rather than results.

As a result, pricing ethics and legality sit in a grey area, constantly ebbing and flowing between ethical and unethical.

Give two examples of unethical pricing (or unethical pricing practices) and explain why you think it is unethical?