Illegal advice that is well-intentioned is still illegal advice
Photo by Cameron Clark
As a professional business consultant, I talk about pricing often. You may have noticed over the past 17 years that I’ve always been very specific and intentional about how I talk about it and what I recommend.
This is because, in the US, there are laws that impact not only how you price, but also how you can talk about pricing with other companies.
Other countries have these types of laws too, and they vary place to place. This post is going to focus on US businesses specifically, but for those of you based elsewhere, make sure to look into your own national and local laws to note what you need to be adhering to as you run your business and set your pricing.
The wedding industry may be largely unregulated with licensing only required for very few vendor categories (cosmetologists, food and beverage handlers, etc), but owning a business in general is regulated in many different ways.
Most pricing regulations fall under "antitrust" laws designed to ensure the market stays competitive for consumers, not necessarily for businesses.
"Price fixing" is a term most people are at least peripherally aware of and it is part of the anti-collusion laws set out in the Sherman Act of 1890. Since then, other antitrust laws have been enacted as well.
There are three main organizations in the US that you do not want to "f— around and find out" with as a business owner: the IRS, the Department of Labor, and the Department of Justice.
Antitrust laws fall under the Department of Justice.
What is collusion?
Collusion is when a group of vendors create conditions that artificially inflate prices, make it harder for buyers to shop around, block competition in some way, or generally make the market unfair for consumers.
There are three main types of collusion:
1) Price Fixing
Price fixing (aka price rigging) is when a group of vendors agrees to charge a similar rate, use the same pricing model, adhere to the same minimums or pricing schedule, not negotiate or discount (or to only offer the same discount amount), etc.
The prices don’t have to be exactly the same nor does everyone have to participate for it to be considered price fixing.
2) Bid Rigging
Bid rigging is when a group of competitors decide in advance who is going to get a particular client.
This typically happens through vendors agreeing not to bid on a particular project or vendors creating proposals they know a potential client will never say yes to so that they choose the pre-determined vendor.
It can also include bid rotation which is when a group of vendors agree to take turns submitting the winning proposal, as well as subcontracting schemes which is an agreement to not bid in return for being hired by the winning vendor as the third-party supplier or subcontracted company for that contract.
3) Market Division/Allocation Schemes
Market division is when vendors agree to allocate certain geographical areas or certain types of projects to specific people.
For example, a group of planners agreeing that they will each refer any South Asian wedding inquiries they receive to one specific planner or any destination weddings in Ireland to another and not try to sell their own services is considered a market division scheme.
Certain red flags the DOJ looks for to determine collusion are:
“Any statement indicating that vendors have discussed prices among themselves or have reached an understanding about prices.”
“Any reference to industry-wide or association price schedules.”
“Any statement indicating advance (non-public) knowledge of competitors’ pricing.”
“Statements to the effect that a particular customer or contract “belongs” to a certain vendor.”
They also look at what they consider to be “conditions favorable to collusion” which include how well vendors know each other through association memberships, mastermind memberships, accountability groups, conferences, FAM trips, social groups, working together, etc.
Most business owners in the wedding industry got into the work as a creative outlet and don’t realize that collusion is illegal. And not just a “slap on the wrist with a speeding ticket” level of illegal – violations of the Sherman Act are a felony and the fine for corporations (LLCs, S-Corps, C-Corps, etc) is up to $100 million and for individuals (sole-proprietors) up to $1 million or 10 years in prison, or both. On top of these fines, penalties can also include paying restitution and recovery of up to three times the amount to previous clients who paid prices set this way.
Proving that you participated in collusion does not have to include formal written agreements. Evidence can include testimony as well as things like texts, group chats, facebook posts, private forum boards, podcast interviews, phone records, contracts, bank statements, etc.
What’s more, under the Sherman Act, once collusion has been proven, arguments about market share, or competitors undercutting you, your opinions that the pricing was reasonable, ignorance of the law itself, etc, don't count as justification.
What does collusion look like in the wedding industry?
Here are examples of a few things that count as collusion within the wedding industry:
A group of wedding planners agreeing to charge a certain percentage or all switch to a percentage model.
Suggesting or recommending that wedding pros follow certain minimum (or maximum) fee amounts for various budget levels.
Recommending that wedding pros never negotiate and always keep their prices firm.
Recommending that wedding pros only offer discounts up to a certain amount.
Policing a group of people for adherence to the "suggested" pricing. For example, revoking someone's membership in a mastermind group for being "uncoachable" because they wouldn't change their pricing to be similar to everyone else's.
A workshop or course that only presents one pricing model or recommends it as the one everyone in a vendor category use.
A planner increasing a wedding pro's price before sending the proposal to the client because they believe the wedding pro deserves to be paid more and should be at the same price point as the other wedding pros they're referring.
Telling a vendor they have to charge a certain price before you'll even refer them to the client.
A planner or wedding venue only hiring one particular vendor for every wedding without soliciting proposals from others or only rotating through the same group of vendors every time without giving others the chance to compete.
(When the American Association of Bridal Consultants set the guideline – in 1955 – that wedding planners should always offer a minimum of three vendor referrals per category, it wasn't an arbitrary rule of thumb – it was to protect planners from collusion accusations.)
An industry association, conference, or mastermind group publishing, posting, or distributing anything that shares what everyone’s charging or even how they’re specifically charging.
Even if it’s “anonymous” — if someone can connect the info to a specific person or company, or reasonably guess, or even Nancy Drew it with a little more legwork, you can’t put it out there.
Sharing this info in this way is not considered benchmarking or market research.
There are laws about how market research and surveys on pricing have to be collected and how the results have to be presented — and there are minimum percentage weights that have to be met in the data analysis for it to be legally publishable at all. (Rachel makes sure Splendid Insights stays compliant on this and I am so grateful for her because it is a lot of work.)
The DOJ also considers a group of same-category business owners discussing their current and future business plans, processes, and pricing to be anti-competitive and flags it as evidence of collusion.
Companies can talk about what they've done in these areas in the past, but not about what's coming up.
So for example, under Antitrust laws, an accountability group of florists isn't allowed to discuss how they plan to charge in the future, their contract terms, etc because the DOJ considers that to be creating market conditions that aren't fair to the consumer.
That said, if it's something that makes the market more efficient and lowers costs – such as an installation technique that uses fewer supplies and takes less time thereby lowering labor costs – that is information that the DOJ does allow to be shared because those lower supply and labor costs are beneficial to the consumer because it reduces the price they pay.
Listen, I don't like that you can’t share with accountability partners who do the same type of work you do, either – I'm passing along this info because this type of sharing happens every day.
Under the Antitrust laws, you also can't agree with other companies to only pay employees or subcontractors a certain amount (aka wage-fixing) and you can't agree to not hire employees from other specific companies (aka no-poaching).
Remember, these laws are not about what feels fair to your bottom line as a business owner – they are about what's fair to the consumer.
Setting Your Prices
When it comes to setting your prices:
Know your numbers: your financial goals, your spending habits, your tax rates, your debts, your assets, your COGs, your state’s labor laws and how they relate to compensation (ex: in some states you have to contribute the same amount to your employees’ retirement funds that you contribute to your own; in some states subcontractors can only use their own equipment – like cameras, lenses, lighting – which means hiring a second shooter as a temp employee may make more sense but includes additional financial considerations), taxes for remote workers (you pay and file based on where they live, not where your company is located), etc.
As you can see, industry recommended minimums are not only anti-competitive to the consumer, they could very well end up being anti-competitive to you, too, if they don’t serve your specific numbers.
Consider multiple pricing models and write a pros and cons list for each based on your business, market, and financial goals.
Certain pricing models work better for luxury, certain work better for mass market volume so decide how you want to structure your business based on your ideal lifestyle as well.
(Both luxury and mass market can be incredibly profitable in weddings – anyone who says otherwise has a narrow scope of experience.)
Remember that in the wedding industry most people pulled their pricing out of the sky or just copied other competitors who did the same and aren’t actually making any money. Even if you’re not colluding and you’re just matching based on a competitor’s pricing page on their website, the chances that you’re copying faulty information is very high.
Under antitrust laws, you are allowed to be the most expensive as long as what you’re charging doesn’t fall under “predatory pricing” (several planners were sued for charging change fees in 2020 — the attorneys for the couples argued that the fees were predatory because the pandemic was outside everyone’s control).
If you want to charge a $20 million design fee for a luxury wedding and you get it — that’s considered competitive because there were other opportunities for the client to hire someone equally talented who cost less. The client opted for the more expensive option even though they also received lower priced proposals.
You’re also allowed to be the cheapest option if you want to – no matter how much it may annoy your peers.
There are strategic pros and cons to each approach and you should weigh them against your specific goals and numbers, not choose based on what everyone else is doing.
Bottom line: Your pricing has to be independently decided.
You don’t get to say, “I was just following what my mastermind group told me was a fair rate” or "The photographer’s online course said this was the best way to price because it worked for her” or “The wedding planner on stage at the conference told us all to charge 20% and not to get out of bed for anything less.”
The DOJ considers these to be attempts to erase price-based competition — even if each wedding pro genuinely believed they were “raising the bar” of the industry by sharing that advice.
Community With Competition
The general idea of "community over competition" is one I support – you should be able to make friends in the industry that you can trust. You should be able to refer them when you’re booked or call them if you need them to cover a wedding because you caught Covid, had a family emergency, broke your arm and can't photograph, etc.
Where this concept gets murky is the idea that the people who aren't sharing everything are old-school, scared of being replaced, or have a scarcity mindset.
No.
They are simply running their businesses legally. The people sharing everything with their category competitors are not.
Written by
LIENE STEVENS
Liene Stevens, the founder and CEO of Think Splendid, is an author, speaker, and award-winning business strategist. Armed with $2000, a healthy work ethic, and an undeserved dose of privilege, Liene bootstrapped Think Splendid from a scribble in a notebook to a successful wedding business consulting firm with a client list spanning 97 countries.
