Have you ever wondered whether it’s legal for stores to charge one price to one person, and a higher price to another? Senior discounts are a great example. For years, it’s been common practice for stores, restaurants, and other businesses to show respect to senior citizens by offering “senior discounts” on certain goods and services. Very few people question these practices; after all, many elderly citizens live on fixed incomes and need every break they can get. However, if you’re a business owner, you might be wary: are the discounts legal or discriminatory? Interestingly, senior discounts can be considered to be both.
Is it discrimination?
At first glance, senior discounts might seem to be illegal due to issues with age discrimination. After all, younger consumers don’t get the same discounts and may feel slighted because older customers are getting better rates on goods and services. This isn’t the case. Federal laws addressing age discrimination apply to employment only, not purchases. Employers can’t fire someone or refuse to hire them due to their age, but federal age discrimination laws don’t apply to consumer purchases.
While age isn’t a factor, senior discounts could be considered to be a form of “price discrimination”–which, despite its name, is legal. Price discrimination applies when a business charges different rates to different customers for the same products or services. Essentially, there are three degrees of price discrimination:
1st degree price discrimination involves the willingness and ability for each customer to pay a price for products or services. This type of discrimination comes into play when a business tries to charge the highest price possible, but may make allowances for consumers who cannot or will not pay as much as other customers. This sometimes happens at car dealerships or other similar businesses when two individuals are offered two different prices on the same car, but one customer obtains the car at a lower rate than the other.
2nd degree price discrimination may come into play when products or services are sold in large quantities. When buyers pay for more goods and services, they are charged less than buyers who purchase smaller amounts. This typically happens when a larger merchant purchases a lot of a product, such as a television, while a smaller merchant that orders fewer televisions is charged more per television.
3rd degree price discrimination enters into play with senior discounts. This involves products or services being offered to certain segments of the population in order to take advantage of their repeat business. It’s a marketing ploy that takes into consideration the fixed incomes of most seniors and offers discounted services in order to get their business.
In general, the above practices are legal. The exception is when they’re used to reduce competition, as when a lower price is tied to a purchase of another product (see the The Robinson-Patman Act for more info on this law).
Are senior discounts legal?
As long as you’re aware of certain rules covered by federal civil rights law, you can give a senior discount without having to worry about any legal problems. Just keep in mind that businesses that offer products and services to the general public are not allowed to discriminate against customers based on their race, religion, color, or origin. For example, businesses must give the discounts equally to Jewish seniors, or African American seniors. There should be no other restrictions for the senior discount.
So although there’s discrimination involved, it’s not the illegal type. So you can go ahead and offer that early bird senior dinner coupon without any legal worries.
For more small business help, visit our small business legal center.