To small business owners, antitrust laws may feel irrelevant and as though they only apply to industry giants. While headlines often highlight cases involving corporate juggernauts such as Amazon in its 2021 and 2022 price-fixing lawsuits or Google and Facebook, antitrust laws apply to businesses of any size. A Southeastern antitrust case from the early 1980s, for example, involved numerous small road construction contractors but is one of the most significant U.S. antitrust cases to date. This case is a stark reminder that antitrust laws have wide application. They apply to small enterprises, like corner coffee shops and neighborhood bookstores.

When businesses informally divide up their market, have agreements on what to charge, or mutually decide to boycott a supplier or another business, they violate antitrust laws. At its core, antitrust legislation, such as the Sherman Antitrust Act, seeks to safeguard fair competition. It prohibits agreements among competitors that unreasonably restrict trade. Agreeing to fix prices, rig bids, or allocate (divide up) customers, are violations of antitrust laws and are punishable as criminal felonies.

The question then is, how can companies intelligently set prices for their products and services without violating antitrust laws? Avoiding illegal behavior while establishing competitive pricing isn’t an insurmountable challenge. Small businesses have a variety of methods for setting prices.

Conducting comprehensive market research can easily be accomplished through resources

Additionally, smart business owners can set prices based on the perceived value of their products and services. Customer-based or value-based pricing involves engaging potential clients to understand their willingness to pay for specific services or products.

In addition to interviewing customers, the government is another great source for conducting research on prices. The U.S. Small Business Administration has valuable information on items like demand, market size, economic indicators, market saturation, and pricing. Its article on Market Research and Competitive Analysis has a database of resources for small businesses looking to use market research and also provides tips for how to conduct market research and use those results. Census Quick Facts also provides invaluable demographic and economic data, shedding light on customer spending patterns and preferences.

While researching what potential customers would pay is important, companies also should examine the prices their competitors charge. Visiting competing establishments or making phone calls to research prices in the local marketplace are low-tech ways to obtain pricing information. For more high-tech strategies, businesses can track pricing trends through software like Visualping.io or Moat.

Another approach involves cost-based pricing, which examines production expenses and adds profit margins to set prices. Easy-to-use and affordable tools for calculating cost-based prices include TapRun,  Symson, and Conga.

As a small business owner, your prices should always be well-researched yet independent, meaning they can’t be set by agreement with competitors. As you engage in the start-up process or consider making price adjustments, it is essential to be aware of antitrust laws and steer clear of illegal actions.

Legal requirements that affect business operations can be confusing. For assistance with legal issues involved in owning and operating your business, call on the attorneys at Press, Dozier & Hamelburg, LLC who provide guidance tailored to specific business needs.

This blog was authored by Managing Member, Jamie Hamelburg, at Press, Dozier & Hamelburg, who focuses on business law and commercial real estate issues. Collaborating on this piece were Mahlet Ayele and Ananya Roy, interns at the firm and students at Bethesda-Chevy Chase High School. Press, Dozier & Hamelburg is committed to assisting businesses in achieving their goals, providing comprehensive legal counsel across various domains, including business law, employment law, litigation, real estate, estate planning, and business succession planning. Located in Bethesda, the firm serves Maryland, Virginia, and Washington, D.C. For inquiries, Ms. Hamelburg can be reached at (301) 913-5200 and jhamelburg@pressdozierlaw.com.

Note: The content in this Blog is for informational purposes only and should not be acted upon without first consulting legal counsel. It is not intended to constitute legal advice.