Price fixing
Competition law |
---|
Basic concepts |
Anti-competitive practices |
Enforcement authorities and organizations |
Price fixing is an anticompetitive agreement between participants on the same side in a market to buy or sell a product, service, or commodity only at a fixed price, or maintain the market conditions such that the price is maintained at a given level by controlling supply and demand.
The intent of price fixing may be to push the price of a product as high as possible, generally leading to profits for all sellers but may also have the goal to fix, peg, discount, or stabilize prices. The defining characteristic of price fixing is any agreement regarding price, whether expressed or implied.
Price fixing requires a conspiracy between sellers or buyers. The purpose is to coordinate pricing for mutual benefit of the traders. For example, manufacturers and retailers may conspire to sell at a common "retail" price; set a common minimum sales price, where sellers agree not to discount the sales price below the agreed-to minimum price; buy the product from a supplier at a specified maximum price; adhere to a
Price fixing is permitted in some markets but not others; where allowed, it is often known as resale price maintenance or retail price maintenance.
Not all similar prices or price changes at the same time are price fixing. These situations are often normal market phenomena. For example, the price of agricultural products such as wheat basically do not differ too much, because such agricultural products have no characteristics and are essentially the same, and their price will only change slightly at the same time. If a natural disaster occurs, the price of all affected wheat will rise at the same time. And the increase in consumer demand may also cause the prices of products with limited supply to rise at the same time.[1]
In
International price fixing by private entities can be prosecuted under the antitrust laws of many countries. Examples of prosecuted international cartels are those that controlled the prices and output of
Legal status
United States
In the United States, price fixing can be prosecuted as a criminal
Criminal prosecutions must be handled by the
Private individuals or organizations may file lawsuits for triple damages for antitrust violations and, depending on the law, recover attorneys fees and costs expended on prosecution of a case.
Under American law, exchanging prices among competitors can also violate the
Since 1997, US courts have divided price fixing into two categories: vertical and horizontal maximum price fixing.
Canada
In Canada, it is an indictable criminal offence under Section 45 of the Competition Act. Bid rigging is considered a form of price fixing and is illegal in both the United States (s.1 Sherman Act) and Canada (s.47 Competition Act). In the United States, agreements to fix, raise, lower, stabilize, or otherwise set a price are illegal per se.[9] It does not matter if the price agreed upon is reasonable or for a good or altruistic cause or the agreement is unspoken and tacit. In the United States, price-fixing also includes agreements to hold prices the same, discount prices (even if based on financial need or income), set credit terms, agree on a price schedule or scale, adopt a common formula to figure prices, ban price advertising, or agree to adhere to prices that are announced.[5]
Although price fixing usually means sellers agreeing on price, it can also include agreements among buyers to fix the price at which they will buy products.
Australia
Price fixing is illegal in Australia under the
New Zealand
New Zealand law prohibits price fixing, among most other anti-competitive behaviours under the Commerce Act 1986. The act covers practices similar to that of US and Canadian law, and it is enforced by the Commerce Commission.[10][11]
European Union
Under the
United Kingdom
British competition law prohibits almost any attempt to fix prices.[13]
The
However, price-fixing is still legal in the magazine and newspaper distribution industry, and sometimes in the motion picture industry.[16] Retailers who sell at below cover price are subject to withdrawal of supply. The Office of Fair Trading has given its approval to the status quo.[citation needed]
Exemptions
When the agreement to control price is sanctioned by a multilateral
International airline tickets have their prices fixed by agreement with the
Examples
Compact discs
Between 1995 and 2000 music companies were found to have used illegal marketing agreements such as
Dynamic random access memory (DRAM)
In October 2005, the
In October 2004, four executives from Infineon, a German chip maker, received reduced sentences of 4 to 6 months in federal prison and $250,000 in fines after agreeing to aid the
Capacitors
In March 2018, the
Perfume
In 2006, the
Liquid crystal displays
In 2008 in the US,
South Korea–based LG Display would pay $400 million, the second-highest criminal fine that the US Justice Department antitrust division has ever imposed. Chunghwa would pay $65 million for conspiring with LG Display and other unnamed companies and Sharp would pay $120 million, according to the department.[22][23]
In 2010, the
Air cargo market
In late 2005/early 2006,
In December 2008, the
The Commission noted that it might involve up to 60 airlines.[30] In 2009 the Commission said overseas competition authorities were also investigating the air cargo market, including the US and Australia where fines had been imposed.[28]
Tuna
An attempt to fix the price of tuna resulted in a $25 million fine for Bumble Bee Foods in 2017 and a $100 million fine for StarKist in 2020. Christopher Lischewski, the former CEO of Bumble Bee, was sentenced to 40 months in jail and fined $100,000 for his 2010–2013 involvement.[31]
During the COVID-19 pandemic, companies such as Pfizer and Moderna announced rates for their coronavirus vaccines that would differ based on deals established with various governments. Executive orders were enacted in the United States to lower prescription drug costs which was claimed by Pfizer's CEO to cause "enormous destruction" to the pharmaceutical industry.[32]
Signs of possible price fixing during bidding
It is more common to have price fixing trends during the bidding process, such as:
- If the bid or quoted price is much higher than expected, the reason may be collusive to set the price or just overpriced, but it is legal in itself.
- If all suppliers choose to increase prices at the same time, it is beyond the scope of input cost changes.
- If the price of a new supplier is lower than the usual corporate bidding price, the reason may be that there is a collusion of bidding among existing companies.
- If the price of a new supplier drops significantly after bidding, the reason may be that some suppliers have been colluding and the new supplier has forced them to compete.[33]
Impact of price fixing
When prices are determined between various companies, it may affect consumers' choices to a certain extent, and affect small businesses that rely on these suppliers.[34]
Taking
Criticism on legislation
See also
- Antitrust
- Bid rigging
- Collusion
- George Howard Earle Jr.
- FBI
- Gold fixing
- Herfindahl index
- London Gold Pool
- Monopoly
- Oligopoly
- Price controls
- Price gouging
- Resale price maintenance
- Tacit collusion
- Trade Practices Act 1974 (Australia)
- US Department of Justice
- Variable pricing
- Fixed price
- Vendor lock-in
- Price fixing cases
References
- ^ "Price Fixing". ftc.gov. Federal Trade Commission. Retrieved January 20, 2023.
- American Agricultural Economics Association. Retrieved September 30, 2014.
- ^ "15 U.S. Code § 1 - Trusts, etc., in restraint of trade illegal; penalty". law.cornell.edu. Legal Information Institute. Retrieved January 20, 2023.
- ^ "About Antitrust Bureau". oag.state.ny.us. New York State Attorney General. Archived from the original on September 29, 2008. Retrieved June 15, 2016.
- ^ a b c d "Be Careful About Antitrust Law!". Art Publishers Association. February 2000. Archived from the original on September 27, 2007. Retrieved June 15, 2016.
- ^ SSRN 1839223.
- ^ Sauer, Raymond D. "VERTICAL PRICE FIXING". Archived from the original on July 8, 2013. Retrieved July 9, 2013.
- ^ State Oil Co. v. Khan, 522 U.S. 3 (1997).
- ^ United States v. Socony-Vacuum Oil Co., 310 U.S. 150 (1940), reversing 105 F.2d 809 (7th Cir. 1939), reversing 23 F. Supp. 937 (W.D. Wis. 1938).
- ^ "Commission warns GP's about price fixing". Release No 133 (Press release). Commerce Commission. May 18, 2005. Archived from the original on April 16, 2009.
- ^ "Commerce Act 1986". Parliamentary Counsel Office. October 5, 2022 [Originally published April 28, 1986]. Retrieved January 20, 2023.
- ^ Gow, David (April 18, 2007). "Heineken and Grolsch fined for price-fixing". The Guardian. Brussels. Retrieved January 20, 2023.
- ^ "Avoid and report anti-competitive activity". gov.uk. Government of the United Kingdom. Retrieved January 20, 2023.
- ISBN 978-0197263266.
- ^ Cassidy, Suzanne (October 7, 1991). "THE MEDIA BUSINESS; British Book Shops in Price Skirmishes". The New York Times. Retrieved January 20, 2023.
- ISSN 0029-3571. Retrieved January 20, 2023.
- ^ "Australia: IATA enters price fixing saga". Competition Policy International. October 7, 2012. Retrieved January 20, 2023.
- ^ a b JiJi (March 22, 2018). "EU fines Japanese firms over price-fixing cartel for capacitors". The Japan Times. Brussels. Archived from the original on March 22, 2018. Retrieved 22 March 2018.
- ^ Passariello, Christina (March 15, 2006). "France Fines Perfume Makers And Vendors in Price-Fixing Case". The Wall Street Journal. Paris. Retrieved January 20, 2023.
- ^ Frieden, Terry (November 12, 2008). "$585 million LCD price-fixing fine". CNN. Washington, D.C. Retrieved January 20, 2023.
- ^ "LG, Sharp, Chunghwa Agree to Plead Guilty, Pay Total of $585 Million in Fines for Participating in LCD Price-fixing Conspiracies". justice.gov. Washington, D.C.: United States Department of Justice. Retrieved January 20, 2023.
- ^ Bliss, Jeff (November 12, 2008). "LCD Makers Will Plead Guilty in Price-Fixing Scheme (Update2)". Bloomberg News. Archived from the original on October 23, 2012.
- ^ "UPDATE 2-LG Display, Sharp, Chunghwa say guilty in LCD case". Reuters. November 12, 2023. Retrieved January 20, 2023.
- ^ White, Aoife (December 8, 2010). "LCD-Panel Makers Fined $649 Million by European Union for Price Fixing". Bloomberg News. Retrieved January 20, 2023.
- ^ "Joaquín Almunia Vice President of the European Commission responsible for Competition Policy Press conference on LCD cartel, Visa and French chemists' association decisions Press conference Brussels, 8 December 2010". europa.eu (Press release). European Commission. December 8, 2010. Retrieved January 20, 2023.
- ^ Kim, Yoo-chul (December 9, 2010). "2 LCD giants face contrasting fates". The Korea Times. Retrieved January 20, 2023.
- ^ Caldwell, Alicia A. (March 5, 2011). "21 airlines fined in price-fixing scheme". NBC News. Retrieved January 20, 2023.
- ^ a b "Commerce Commission procedure in accordance with standard best practice". Release no 113 (Press release). Commerce Commission. March 20, 2009. Archived from the original on September 6, 2009. Retrieved June 23, 2014.
- ^ "Air New Zealand final airline to settle with Commerce Commission in air cargo case" (Press release). Commerce Commission. June 13, 2013. Archived from the original on October 3, 2014. Retrieved June 23, 2014.
- ^ "International air cargo cartel to be prosecuted" (Press release). Commerce Commission. December 15, 2008. Retrieved June 23, 2014.
- ISSN 0362-4331. Retrieved January 20, 2023.
- ^ Lovelace Jr., Berkeley (July 28, 2020). "Pfizer CEO says Trump's executive orders overhauling U.S. drug pricing will upend the industry". CNBC. Retrieved January 20, 2023.
- ^ Australian Competition & Consumer Commission. Retrieved January 20, 2023.
- JSTOR 2098269.
- ^ DeBow, Michael E. (1988). "What's Wrong with Price Fixing: Responding to the New Critics of Antitrust". Regulation. Vol. 12, no. 2 (Summer 1988). American Enterprise Institute. Retrieved January 20, 2023 – via Cato Institute.
External links
- Sticker Shock, Guilty Pleas Show High Cost of Price-Fixing in Auto Industry, FBI
- Avoid and report anti-competitive activity
- US Department of Justice Antitrust Resource Manual
- Identifying Horizontal Price Fixing in the Electronic Marketplace
- SONY Accused of Price Fixing in the UK - November 15, 2005
- Antitrust Enforcement
- Be Careful About Antitrust Law!
- US Department of Justice Website, Samsung Pleads Guilty to Price Fixing - October 5, 2005
- US Department of Justice Website, Infineon Pleads Guilty to Price Fixing - October 2004
- Antitrust settlement in Nevada price-fixing case
- In Defense of Price Fixing by Sean Gabb
- "LVMH, L'Oreal, PPR fined for perfume price collusion; LVMH plans appeal" Forbes
- Concepto de Fixing en Español