By Steve Moran
A friend sent me a copy of this lawsuit, and honestly, I was startled — not by the lawsuit itself, but rather that this kind of pricing discussion is still going on in the industry. I am always hesitant to publish stories like this, because it puts the industry in a bad light, and it has the potential to encourage similar lawsuits. Neither of those is my desire.
My goal is to provide this as a learning experience to keep other operators out of trouble.
Here are the details, noting that these are allegations by the plaintiff, Sarah Harris. I have reached out to HarborChase for comment.
- On July 26, 2021, Sarah Harris was hired by HarborChase of Southlake to be the director of sales.
- Part of her onboarding training included a requirement that she would be responsible for filling out a competitive analysis on a quarterly basis. This competitive analysis included pricing for each floor plan, any price increases, any monthly incentives, and the amount of deposit required.
- She was told that she would be required to fill out the data by setting a meeting with her counterpart at other communities and exchanging pricing information.
- On September 14, 2021, she received an email from the VP of sales and marketing instructing her to update the competitive analysis document.
I know that our Competitive Analyses are typically due quarterly, but with budget season here, it is vital that every community have the most up-to-date intelligence possible on your competition. Please make sure that your Competitive Analysis is updated prior to your budget meeting. Make sure that you have accurate occupancy numbers and that you are showing any incentives that are being offered so that we can compare our rates to what is actually being sold.
- On September 15 of the same year, her direct supervisor, the executive director, sent a follow-up email asking if the analysis had been updated.
- Harris then met with the HR director to express that she believed that she was being asked to do something that was an illegal antitrust activity.
- That same day, Harris emailed the executive director saying she would not participate in updating the competitive price analysis:
I do not participate in Competitive Analysis. It is price fixing, breaks anti-trust federal laws and is part of the Sherman Anti-Trust Act which states it is a felony to discuss pricing with your competitors. Not only can the company be prosecuted but also the individual involved in the conversations.
- Rather than being offered an alternative legal method for obtaining this information, Harris was chastised and was told she would be fired if she did not comply. When she refused, she was told to immediately gather her belongings and leave the premises.
- Subsequent to being escorted off the premises, HarborChase denies they terminated her employment and that she resigned.
- They are asking for the usual monetary damages that include lost wages and benefits (both past and future), payment past and future, emotional distress, and legal fees.
What We Know
This is not a new issue, and several people I talked to were surprised this is still happening in the industry, given how well known it is that this puts senior living organizations in serious jeopardy.
I talked to attorney Joel Goldman at Hanson Bridgett about this case. Here is what he had to say:
This is a good reminder that operators should not be discussing pricing with each other, PERIOD.
What to Do
Having competitive pricing is important. Here is how to get it legally and ethically:
- Mystery shop your competitors — and it has to be a real mystery shop, not a wink-wink mystery shop.
- If a prospect comes to your community and has shopped other communities, it is fine to ask them about pricing in as much detail as you want.
- Best practice would be to hire an outsider to do your mystery shopping for you. Yep, it will cost you some money but it will also give you the information you need to make intelligent business decisions.
- Make it easier on everyone by posting your prices.
One More Thing
If you are at a conference, or even talking to a reporter or writer, and someone asks you about pricing, be very careful, even responding with something like, “We plan on raising prices 10% this year.” It could get you in trouble.
It Is Frustrating
I talked to one leader who hated the conversation. Her explanation was that CEOs are trying to figure out what the competition is doing so they don’t raise prices above everyone else, thinking this is actually beneficial to the consumer. Maybe, but imagine the big-four airlines saying they are going to get together to talk pricing so they could keep prices as low as possible.
No one would believe it. Pure and simple.