This kind of behavior is not unusual in my experience.  I've had overseas clients demand a $2.00 decrease in my fees *or else...*  So my very polite response has been to not cave in to what looks an awful lot like extortion.

  It's the *or else* part of it that annoys me the most.  Presumably, that $2.00 is going straight into the pockets of the company owners, although I have heard these reductions justified by them as a need to stay competitive.  My take on it is that if they want to stay competitive they might try lowering their employees' wages first & see how far that gets them.  Then, after that clearly doesn't work, they might think about just how much profit taking they need to maintain.  Is my $2.00 going to buy them a new Mercedes? 

I believe that the principles of fair play are important. Don't gaffe me on my fees & when times are tough for all of us I won't bump up my fees to your company.  I will do just about anything reasonable to help my clients stay afloat; but fair is fair & I am in this business to make a living as well. 

In any race to the bottom, particularly when it's all about the lowest fee possible, the companies demanding the lowest possible fees will certainly be sure to get what they pay for.