What is Price Fixing?
UPDATED: February 7, 2020
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Price fixing is a conspiracy between business competitors to set their prices to buy or sell goods or services at a certain price point. This benefits all businesses or individuals that are on the same side of the market and involved in the conspiracy, as prices are either set high, stabilized, discounted, or fixed.
How Price Fixing Violates the Law
Price fixing violates state and federal competition laws, which prohibits businesses collusion. Business collusion is an agreement between businesses that fraudulently prevents other businesses from being able to compete in the open market. Price fixing violates competition law because it controls the market price or the supply and demand of a good or service. This prohibits other businesses from being able to compete against the businesses in the price fixing agreement, which prevents the public from being able to expect the benefits of free competition. This violation can be implied or express, with minimal evidence needed to prosecute.
Even if there is evidence that competitors have appeared to agree on a price, this can lead to a collusion charge. Price fixing can be prosecuted federally as a criminal violation under the Sherman Antitrust Act or a civil violation under the Federal Trade Commission. Price fixing can also be prosecuted under state antitrust laws.
How Price Fixing Happens
Price fixing can happen several ways. Businesses can agree to set their prices high, so that consumers have no choice but to buy at the high price. They can also agree to set mark-ups, sales, surcharges or discounts on goods or services at the same rate. Businesses can also agree to set their maximum purchasing price so that a seller of a product, service or commodity will be forced to sell at the set price. Price fixing can also happen in the credit market, where companies agree to standardize credit terms to consumers. Many states have “below sales-cost laws,” which prohibit businesses from selling goods or services below market cost, if their intent is anti-competitive.
It is important to remember that illegal price fixing only occurs when there is an agreement between businesses to fix prices. A business, acting on its own, may use legitimate efforts to obtain the best price they can, including the ability to raise prices to the detriment of the general public. Further, businesses that conform to the same prices without an express or implied agreement are not in violation of price fixing laws. However, there is a fine line between conforming to prices at one’s own accord, and having an implied agreement to do so.
This information is only a brief summary of the extensive price fixing laws and applications. For further questions or information about price fixing pertaining to your specific case, you should contact an experienced business attorney.