Monday, November 13, 2006

Cross Promoting and Price Collusion in Advertising

There seems to be loopholes in the advertising laws in the United States and first let me say I am not an advocate of more rules and regulations on advertising or marketing, there are way too many already. However, I have discovered an interesting cross promotion strategy that resembles unspoken price collusion that we see in marketing all the time.

First let me point out how gas stations, hotels and other such business check to see what the competition is doing every day and when one raises their price the others raise theirs as well only hold it just slightly under the highest price, thus creating an upward biased in pricing. It is a mild form of price collusion, which generally cannot be enforced and indeed it appears it is so commonplace in the market place that if cannot be stopped. Indeed proving someone was engaged in such common practice cannot even be proven beyond a shadow of a doubt.

Now then if two people in an similar sub-sector of an industry each write articles and promote the other or endorse them and they do not actually compete against each other, then they are effectively Buzz Marketing and there is nothing anyone can do about that, as there is no money transferring hands or even any contact to set up such a program.

The FTC does this all the time. They promote the BBB and the BBB promotes the FTC. But in reality the FTC knows that the BBB has committed fraud in telephone sales and does not go after them. And the BBB knows that much of the cases that the FTC brings is simply competitors in the marketplace making complaints. This is the cheating type of cross promoting that you can do in your business too. And that is my opinion.
There seems to be loopholes in the advertising laws in the United States and first let me say I am not an advocate of more rules and regulations on advertising or marketing, there are way too many already. However, I have discovered an interesting cross promotion strategy that resembles unspoken price collusion that we see in marketing all the time.

First let me point out how gas stations, hotels and other such business check to see what the competition is doing every day and when one raises their price the others raise theirs as well only hold it just slightly under the highest price, thus creating an upward biased in pricing. It is a mild form of price collusion, which generally cannot be enforced and indeed it appears it is so commonplace in the market place that if cannot be stopped. Indeed proving someone was engaged in such common practice cannot even be proven beyond a shadow of a doubt.

Now then if two people in an similar sub-sector of an industry each write articles and promote the other or endorse them and they do not actually compete against each other, then they are effectively Buzz Marketing and there is nothing anyone can do about that, as there is no money transferring hands or even any contact to set up such a program.

The FTC does this all the time. They promote the BBB and the BBB promotes the FTC. But in reality the FTC knows that the BBB has committed fraud in telephone sales and does not go after them. And the BBB knows that much of the cases that the FTC brings is simply competitors in the marketplace making complaints. This is the cheating type of cross promoting that you can do in your business too. And that is my opinion.

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