Last Updated Apr 1, 2010 12:42 AM EDT
The logic of that, according to Japan's Fair Trade Commission, is that without the prices being visible in advertising it would be more difficult for a price-war to occur with rival lens-makers. Retailers were "forced" not to mention prices in ads, according to McClatchy-Tribune.
The tactic is interesting for two reasons: First, it's new. And second, it's about "signaling," a semi-legal price fixing tactic that corporate strategists sometimes employ in an effort to set prices in a market without actually conspiring with competitors.
In this case, J&J's competitors would have instantly noticed that its prices were not stated in retailer ads. While this would not in itself stop rivals from cutting their prices, it would signal that J&J was not interested in competing on price. Whenever a competitor signals that, rivals have the option of not cutting their prices -- and everyone in the category can enjoy the excess profits that result. Those who don't acknowledge the signal will trigger a price war, and everyone's profits suffer as a result.
The no-price tactic can now be added to Big Pharma's existing armory of pricing strategies, which include:
- Premiums for above-average effectiveness.
- Paying competitors not to enter your market.
- Lobbying the FDA to shut down your competitors.
- Offering seemingly generous price freezes at a time when the price is high.
- Systematically raising the price as long as it doesn't crimp demand.