Risks of giving friend-clients a discount: price discrimination?

Question

It seems normal to charge friends, relatives, neighbours, etc. a lower price than people you don't know at all. However, wouldn't that be price discrimination, and isn't that a crime?

I don't want to get sued by a company for letting him pay a higher price than a friend of mine while it's for a similar product. Is there any chance on that when I charge friends with lower prices than others?

If so, how can I make sure I don't discriminate with my prices?

The easy solution would be to charge them the same, but that might look bad from a social perspective. Another solution would be not to work with people I know in a personal sphere, but then I would lose clients and portfolio opportunities.

_{Note: I'm a web developer. Most of the time, assignments are significantly different and the problem won't arise. However, when clients ask for basic websites which isn't more than a WordPress installation and a simple theme, there might be a problem.}

Answer 1

Even if you sell commodities, you are allowed to give bargains to chosen groups of customers. It's fully up to your decision whom you give a discount. You can target your promotions to the arbitrarily chosen group of person. It's your marketing strategy.

I don't know any legal system, that would allow free entrepreneurship and in the same time restrict small companies to offer the same price to everyone. This may not be case for big companies (anti-monopoly laws).

As a freelancer you are not only small, but you don't sell commodities, you offer services. Offering services in most cases involves direct contact with client, so it's much more place for price negotiations than with e-shop. You don't have to make your invoices public, so in fact, nobody will know for how much have you sold your services to anybody else.

What's more, in case such freelance activities as webmastering, every project is individual and the price is calculated individually. Even if the prices were public, and the bargain would be 50%, it's still would not be so obvious that you have given a bargain. You could always say, that because someone is your friend, he/she have given you more freedom in design, which resulted in lower price etc.

The biggest risk is of social nature. If you have 10 close friends, and one of them you will give a big bargain, the others may also expect the same bargain from you. So you should think twice before being too generous...

Answer 2

First you need to understand some basics of discrimination law in your area. I can only speak to the United States generally (and will note some exceptions below).

In general, in the United States, antidiscrimination law came about because of the experience of segregation, and it attempts to balance the legitimate needs of businesses with the general interest in society of not having specific vulnerable groups targetted for problematic treatment. I think this same balance must exist everywhere that antidiscrimination law exists, but lines need not be drawn all in the same place (and indeed aren't even in the US). In the US for example, race is generally held to far stricter criteria than just about anything else because of our bad experiences in this area.

Consequently in most of the US (California state law aside, see below), the question of whether discrimination is illegal has to do with the reason for the discrimination and its impact across society. So for example if I give all African Americans a discount that would be illegal because this would be discriminating on the basis of race. If I give blue-eyed people a discount, the same would probably apply because blue eyes very strongly correlate with socially constructed racial categories. On the other hand if I give non-profit businesses a discount, there is no reason why this would be a problem. Similarly if I give family members a discount, I would expect even if they were all the same race that this would be ok, because family members are such a narrow slice of society there is no general social damage done. In general, with friends and family members, in the US, you aren't going to run into trouble. I do not know about a few exceptional places like California though so if you live there, a quick attorney consultation might be a good idea.

I single out California because that state has its own approach to anti-discrimination law which is in fact older than US federal antidiscrimination law. The Unruh Act is generally interpreted to ban discrimination in business dealings on any criteria outside the business deal context (I suspect that friend/family discounts would still be OK but I am not comfortable saying this for sure). The Unruh Act is sufficiently vague that even the ACLU has fallen afoul with this act for kicking off-duty police officers out of meetings on police surveillance.

I say generally interpreted because despite what the text of the law says, the California courts have generally looked to legislative history to see the law as advocating an end to any discrimination on non-relevant criteria. Again, California is an exception but it shows how far this can vary even within a single country.

So my advice would be to start by finding out what categories of discrimination are banned where you live. Chances are you will find that this is not an issue. However if you are still concerned, this is something an attorney should be able to clear up very quickly.

Answer 3

I would argue for your easy solution - charge them the same. Your primary concern is that that might "look bad from a social perspective." However, I believe that providing discounts to friends, relatives, etc. often actually causes social issues.

First of all, where's the cutoff? As soon as you provide a discount to one friend or relative, they may refer a friend of theirs and say, "Keelan will take care of you with a good rate." If this comes to be expected, you're eventually going to be placed in a position of either resenting that you're doing work at a discount for someone you aren't that close to or possibly upsetting a friend or relative by refusing to provide a discount. Your good friends may also turn out to be bad clients, constantly expanding the scope of the job and placing you in an uncomfortable position again of refusing or resenting.

You're a professional and if your friends and relatives respect you, they'll understand that and will respect the separation between your work and personal life. Having said that, obviously it feels good to do favors for people you care about. One approach that would avoid the perception of discrimination would be to charge your normal hourly rate, but to do some work on your own time. For example, you might offer to do the domain setup and graphics work as a favor on your personal time, then charge the full rate for the coding "on the clock." That way you're charging exactly the same for your professional time as you would for any other client, you're just reducing the scope of the job. That also helps your friend/relative to understand the value of your work and to appreciate that you're spending your personal time on them.

As freelancers, it's very easy to blur the line between personal and professional time, and I think this approach helps keep it clear both for ourselves and our acquaintances.