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If a company sells a product globally, but wishes to set the price of that product differently per country, is that discrimination or legal?

The business reason is, it is more profitable to sell to some countries but not others. So we wish to disincentivize but not exclude some countries by setting higher prices.

  • It is fairly common for there to be country-specific pricing especially in the realm of selling intellectual property. Books that sell for a certain price in the west are often sold for a substantial lesser amount, e.g. 1/4 the price, in other countries, for the simple reason that the market will not support full western price. – user6726 Sep 22 '17 at 4:54
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It is absolutely discrimination - treating one person or group differently from another person or group is the textbook definition of discrimination.

Discrimination is only illegal if it is on the basis of a legally protected class.

You will need to check the law of each country involved but, in general, price discrimination based on location is not illegal.

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  • Can you give any evidence of that? – Learner Sep 22 '17 at 4:35
  • @Learner, The wording Dale is using comes from American laws regarding discrimination. Checking every country's laws in the entire world would be very difficult. – Stephan Branczyk Sep 22 '17 at 9:47
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    @StephanBranczyk actually, it comes from Australian law – Dale M Sep 22 '17 at 11:15
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    For example, if a restaurant offers a "happy hour" with half price drinks from 5pm to 6pm, that is discrimination - people ordering from 5pm to 6pm pay only half the price! And totally legal. – gnasher729 Sep 22 '17 at 18:50
  • I formulated almost the same answer in my head word for word before seeing yours. Price discrimination (usually legal price discrimination) is the source of a very large share of "weird" economic phenomena that people see in daily life. – ohwilleke Sep 22 '17 at 22:20
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This question breaks down into a couple issues, but the quick answer is yes (and thus maybe).

Discrimination

The definition of discrimination is an unjust or prejudicial treatment of different categories of people or things. So technically selling Country A a product for x dollars and Country B that same product for y dollars would constitute discrimination.


Legality

This discussion leaves out things like price gouging, insurance (or other product) redlining, etc., because you asked about disparate selling prices by country. Nonetheless, price discrimination is often legal. To read more about that and the Robinson-Patman Act governing the legality of such discriminations, check the Federal Trade Commission's website.

Your question, however, brings us to international trade and, thus, the World Trade Organization (WTO). Non-discrimination in international trade is fundamental and predates the WTO, going back to what is technically the WTO's predecessor, the General Agreement on Tariffs and Trade (GATT). Non-discrimination in international trade is embodied in the following two principles:

Most-favored nation

Basically, the WTO says that one member country is not allowed to discriminate against its trading partners, other member countries of the WTO. If you grant a trading favor to Country B, you will be expected to grant that same favor to Country C-Z, as well.

Exceptions do apply. There may be free trade agreements between groups of countries where the benefits don't apply to other countries (see NAFTA). Also, measures may be taken against Country B to offset costs to Country A caused by unfair trade practices of Country B.

National Treatment

Similarly, Country A must treat goods produced locally and good imported from other countries in the WTO equally. National treatment simply means treating other countries as a country would treat its own nationals in the realm of international trade.


Note on Applicability: These principles also apply to trade in services under the General Agreement on Trade in Services (GATS) and the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).


Note on Business vs. State: Please note the difference between a private action and a state action. States bring disputes against other states through WTO dispute resolution panels based on the actions of another state or that state's private actors. In economies where the state owns industries, it is a little less complicated. In the U.S., on the other hand, disputes can be more complicated because the U.S. is brought before a panel based on the actions of an actor over which it does not assert direct control.


Note on Application of WTO Rules, Etc.

I believe a full discussion of this is a bit beyond the scope of the question, but generally speaking, certain divisions in the U.S. Commerce Department including, but not limited to, the International Trade Administration are responsible for executing the U.S. Trade Laws. Together, the Department and the body of laws applicable to international trade provide mechanisms to ensure U.S. company compliance with trading rules, provide consequences for not doing so, and monitoring imports and markets to ensure countries from which the U.S. makes purchases are also in compliance.


Conclusion

The legality of price discrimination in international trade is dependent on the federal laws applicable to the good, service, or intellectual property right one is dealing with, where the sold item's destination will be, and whether or not the country the item is from and its destination country are WTO members and/or whether they have ratified any other trade agreements.

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  • Why do you say discrimination is defined as unjust or prejudicial? – Tim Lymington Sep 25 '17 at 12:39
  • In the WTO and in the realm of international trade in general, that's what the definition is. That's how it is formulated because there are times when discrimination is perfectly fine. I gave two examples above: regional free trade agreements and retaliatory measures. Consider NAFTA. By offering Canada and Mexico preferential treatment, the U.S. is therefore discriminating against other countries. It's allowed, though, because it is a multilateral trade agreement. Finally, if Country A determines Country B is using unfair trade measures, Country A may retaliate proportionately. Also discrim. – A.fm. Sep 25 '17 at 12:44

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