Legal Definitions - meeting-competition defense

The meeting-competition defense is a legal argument used by a company accused of price discrimination. Price discrimination occurs when a seller charges different prices to different buyers for the same goods or services, which can sometimes be illegal under antitrust laws designed to promote fair competition.

This defense allows a company to argue that it lowered its price to a particular customer or group of customers not to unfairly disadvantage competitors or monopolize the market, but simply to match a competitor's equally low price offer. To successfully use this defense, the company must demonstrate that it acted in good faith, genuinely believing that a competitor was offering the lower price and that its own price reduction was a reasonable and necessary response to retain business.

• Example 1 (Business-to-Business Sales):

  A large chemical supplier, "ChemCorp," sells industrial solvents to various manufacturing plants. One of its long-standing clients, "AutoParts Inc.," informs ChemCorp that a rival supplier, "Solvent Solutions," has offered them a significantly lower price for their next bulk order of a specific solvent. ChemCorp, after making reasonable inquiries to confirm the competitor's offer, decides to match Solvent Solutions' lower price for AutoParts Inc. to prevent losing the client. If another manufacturing client of ChemCorp, who paid a higher price, later sues ChemCorp for price discrimination, ChemCorp could invoke the meeting-competition defense, arguing it merely responded in good faith to a competitor's offer to retain a valuable customer.

• Example 2 (Wholesale Distribution):

  "Global Electronics Distributors" supplies electronic components to various tech companies. A new startup, "Innovate Devices," approaches Global Electronics for a large order of microchips. Innovate Devices also receives a quote from "Circuit Supply Co." that is 8% lower than Global Electronics' initial offer. When Global Electronics learns of Circuit Supply Co.'s lower quote, and after verifying its legitimacy, it reduces its own price to match it, securing Innovate Devices' business. If a different, existing customer of Global Electronics, paying a higher price for the same microchips, later alleges price discrimination, Global Electronics could use the meeting-competition defense, explaining that the lower price to Innovate Devices was a good-faith effort to meet a competitor's verifiable offer.

• Example 3 (Service Contracts):

  "DataSecure Solutions" provides cybersecurity services to corporate clients. When bidding to renew a multi-year contract with "Financial Holdings Group," DataSecure learns that a competitor, "CyberGuard Inc.," has submitted a bid that is 10% lower for the same scope of services. DataSecure, wanting to retain the lucrative contract, revises its own bid to match CyberGuard Inc.'s lower price, genuinely believing it was necessary to compete. If a different client of DataSecure, paying a higher rate for similar services, later alleges price discrimination, DataSecure could use the meeting-competition defense, explaining that the lower price for Financial Holdings Group was a good-faith effort to meet a competitor's offer and retain a key client.