November 4, 2013
Seventy auto suppliers are reportedly involved in ongoing price-fixing investigations by EU, US, and Japanese government regulators, including 21 who have already pleaded guilty in the US, resulting in $1.6B in fines to date and imprisonment of 17 company executives. These investigations came to light in early 2010 and cover pricing activities back as far as 2002.
How is your company ensuring transparency in the pricing process? If asked by an auditor or regulatory agency, could you easily go back a few years and show the basis of your pricing, who approved them and when? So as to quickly leave no doubt that your pricing was market-based only, and therefore doesn’t put you, your company or your executives at risk?
We pricers generally focus on the well-known benefits an enterprise-class pricing solution offers, such as improving profitability, speeding pricing decisions, and capturing more up-sell/cross-sell revenue opportunities. But, solutions like Vendavo also record your pricing decisions, including the legitimate justifications for those decisions (e.g. based on competitive threat, cost changes, profit, etc.). If questions arise about whether your past pricing strategy was on the up-and-up, you’ll have complete trace of your decision-making, leaving no doubt that you were engaging in rational, market-based pricing with appropriate reviews and controls.
Compare this to the alternative: When questioned about your pricing, you have “the mother of all spreadsheets” that has been revised a hundred times since the period in question, with no record of the reason for those revisions, and no trace of who approved those changes. And, several of your employees have likely moved on – taking the decision-making context with them. Faced with the cost of defending your actions in multiple jurisdictions, against deep-pocketed regulators and class-action attorneys, companies are often forced to pay substantial settlements – even if they did no wrong.
Bottom line: In pricing, it isn’t enough to keep your nose clean. You have to be able to show it, even several years later.
Will you be prepared?
Photo credit: Erin McCracken AP, from USA TODAY