Price fixing is the illegal practice of fixing or controlling a price within a market, rather than allowing it to naturally occur through supply and demand. Often times, companies will get together and conspire to sell a product only at a certain price. The law states that individuals and companies are not allowed to meet with other vendors for the purpose of setting prices on particular goods and services.
What else is considered price fixing?
Price fixing is always a conspiracy between two or more vendors for the purpose of controlling prices in some way on certain products and for the benefit of the vendors. In addition to this, price fixing can be companies setting the limits of prices with a minimum and a maximum. It can include limiting trade-in discounts, limiting discounts, imposing mandatory surcharges, reducing production of output or reducing sales in order to charge more money for products and services (thus, literally controlling the supply and demand), establishing uniform costs and markups across the board, and more. Basically, anything, again, that controls the prices and is arranged by vendors is considered price fixing.
What is the purpose behind price fixing?
If a price is fixed and an alliance formed between all companies carrying particular products and services, these individuals can maximize profits. They can set the prices high enough that consumers will continue to buy, but also to ensure they make a large profit.
Who price fixes?
It is illegal to practice price fixing in the United States. In addition to our practices here, the United Kingdom, New Zealand, and Australia prohibit these criminal acts. However, everywhere else in the world, price fixing can typically be found and is not considered to be criminal or illegal in any way. Moreover, within many of these countries, the governments participate in price fixing to be included on the profits. Because it is not illegal in other countries, OPEC (the global oil cartel) and IATA (for international airline tickets) have not been prosecuted for price fixing. These two organizations actually fall under specific exemptions in the antitrust law.
Price fixing infringes on the rights of consumers within a free enterprise system. It eliminates competition. Any individuals or companies found committing these fraudulent acts are subject to prosecution by law under section 1 of the Sherman Antitrust Act. Typically, the U.S. Department of Justice of the Federal Trade Commission tries these cases. Also, State Attorney Generals may handle such antitrust cases as well.
In the event of price fixing, most of the time, United States officials are onto the scandals. However, should individuals observe trends, which they are concerned about, they can report to any one of the entities above for investigation. Chances are if one consumer recognizes price fixing, there are probably others onto it as well.