What is Price Fixing?

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 product prices are either set high, stabilized, discounted, or fixed.

How Does Price Fixing Violate the Law?

In the United States, price fixing violates state and federal competition laws, which prohibit business collusion. Business collusion is an agreement between businesses that fraudulently prevents other businesses from being able to compete in the open market. It violates competition law by controlling the market price or the supply and demand of a good or service to customers. This prohibits other businesses, whether they are a supplier, producer, manufacturer, or retail seller, from being able to gain market share due to a strong duopoly. This prevents the customers from enjoying the benefits of a competitive market. This violation can be implied or express with minimal evidence needed to prosecute participants with involvement in a price fixing scheme.

Even if there is evidence that competitors have appeared to agree on a price, this can lead to a collusion charge. Price-fixing charges can be prosecuted federally as a criminal violation under the Sherman Antitrust Act or a civil violation under the Federal Trade Commission. It can also be prosecuted under state antitrust laws.

How does Price Fixing Happen?

Price fixing can happen in any segment of the supply chain. Whether the business is a manufacturer, supplier, or retailer, an illegal agreement can occur to fix rates for maximum profit at the expense of American consumers. Businesses can agree to set their prices high so that consumers have no choice but to buy under maximum vertical price fixing terms. If a competitor attempts to enter a market at a lower price, they can also use horizontal price fixing temporarily or long-term to push them out of the market. Typically, those involved in this approach want the maximum price for their products.

This crime can also happen in the credit market, where participants 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 to create anticompetitive effects.

It is important to remember that a crime only occurs when there is an agreement between businesses to fix prices. Some level of price competition and different market value is normal. Market forces can drive some businesses to succeed while others fail in the same industry for multiple reasons. A business, acting on its own, may use legitimate efforts to obtain the best price they can or drive competitors out as long as it’s not a monopoly, including the ability to raise prices for consumers. Further, businesses that conform to the same prices without an express or implied agreement are not in violation of United States laws. However, there is a fine line between conforming to prices at one’s own accord and having an implied agreement to do so.

What’s the Best Thing to Do If You’re Facing a Criminal Investigation?

If you’re facing charges or an investigation for criminal price-fixing and bid-rigging charges or something else, it’s tempting to take immediate action. You panic, change your prices, or do other things to make it seem less suspicious. No matter what it looks like initially, call an experienced business attorney. They can do the research, find out what you’re being investigated for, and help you set up the best defense if necessary.

Case Studies: Examining Price Fixing

Case Study 1: The Vertical Price Fixing Scheme

Aeveral manufacturers of a popular electronic gadget conspired to set high prices for their products. By agreeing on a fixed price, they eliminated competition and limited consumer choice. This scheme violated both state and federal competition laws, leading to a criminal investigation. The participants were charged with price fixing under the Sherman Antitrust Act, resulting in severe penalties and legal consequences.

Case Study 2: The Horizontal Price Fixing Conspiracy

Two major retail giants in the fashion industry colluded to maintain high prices and push out smaller competitors. By agreeing to fix prices at a certain level, they created a duopoly that controlled the market. The Federal Trade Commission investigated this horizontal price fixing conspiracy and filed civil charges against the companies involved. The participants faced substantial fines and legal repercussions for their anticompetitive behavior.

Case Study 3: Credit Market Standardization

This involves a group of financial institutions that conspired to standardize credit terms offered to consumers. By setting uniform terms, they aimed to limit competition and maintain control over the credit market. However, such actions violated antitrust laws and attracted the attention of state authorities. The participants were charged under state antitrust laws, and the investigation revealed evidence of their illegal agreement, leading to significant legal consequences.