Price fixing is an anti-competitive practice in which companies take measures to influence their pricing strategies, such as making agreements with competitors to maintain certain prices, limit potential production or to divide markets amongst themselves. This practice is illegal under antitrust laws in almost every country, as it aims to thwart competition and can cause customers to pay more than they otherwise would have.
The Effects of Price Fixing on the Market
Price fixing has an extremely damaging effect on the marketplace and consumer choice. Consumers are deprived of the opportunity to shop the lowest prices available, as the companies conspire to make lower prices unavailable. This type of collusion also harms the competitive environment by diminishing the incentive of businesses to innovate and improve upon their products. Companies engaging in price-fixing practices can also be seen committing other anti-competitive practices such as bid rigging.
Recent Examples of Price Fixing
In 2020, numerous companies were found guilty of price fixing. The Australian Competition and Consumer Commission conducted investigations and proceedings against Coles Supermarkets and a number of manufacturers of packaged bread. The investigations revealed that during the period of 2012 to 2017, Coles and a group of manufacturers entered into restrictive arrangements, agreeing not to undercut each other’s bread prices. The companies were ultimately found to have been engaging in price fixing, resulting in consumers being overcharged.
Additionally, in the EU, a number of auto parts manufacturers were found to have participated in an anti-competitive cartel. The cartel, headed by Germany-based subsidiary Bosch, included Japanese and German manufacturers who had agreed to coordinate prices and limit production of certain auto components. The EU Commission found the cartel members guilty of price-fixing and issued a record-breaking €746 million fine in 2014.
The Legal Implications of Price Fixing
Collusion and price-fixing are extremely serious infringements of competition laws around the world. Companies found guilty of engaging in these practices can be subject to severe fines and other sanctions. In the EU, for example, companies that fix prices could be hit with fines of up to 30% of their annual worldwide turnover. It is, therefore, essential that companies are aware of antitrust laws and regulations in their jurisdiction and ensure that their business practices comply with them.