Price fixing is an 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 book or list price; engage in cooperative
price advertising; standardize financial credit terms offered to purchasers; use
uniform trade-in allowances; limit discounts; discontinue a free service or fix the
price of one component of an overall service; adhere uniformly to previously-
announced prices and terms of sale; establish uniform costs and markups;
impose mandatory surcharges; purposefully reduce output or sales in order to
charge higher prices; or purposefully share or pool markets, territories, or
customers.
Price fixing is permitted in some markets but not others; where allowed, it is often
known as resale price maintenance or retail price maintenance.
In neo-classical economics, price fixing is inefficient. The anti-competitive
agreement by producers to fix prices above the market price transfers some of
the consumer surplus to those producers and also results in a deadweight loss.
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 lysine, citric acid, graphite electrodes, and
bulk vitamins.[1]

Contents

 1Legal status
o 1.1United States
o 1.2Canada
o 1.3Australia
o 1.4New Zealand
 o 1.5European Union
 1.5.1United Kingdom
 2Exemptions
 3Examples
o 3.1Compact discs
o 3.2Dynamic random access memory (DRAM)
o 3.3Capacitors
o 3.4Perfume
o 3.5Liquid crystal display
o 3.6Air cargo market
 4Criticism on legislation
 5See also
 6References
 7External links

Legal status[edit]
United States[edit]
In the United States, price fixing can be prosecuted as a criminal federal
offense under Section 1 of the Sherman Antitrust Act.[2]
Criminal prosecutions must be handled by the U.S. Department of Justice, but
the Federal Trade Commission also has jurisdiction for civil antitrust violations.
Many state attorneys general also bring antitrust cases and have antitrust offices,
such as Virginia, New York, and California. Further, Where Price Fixing is used
as an artifice to defraud a U.S. government agency into paying more than market
value, The U.S. attorney may proceed under the False Claims Act.
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.[3][4][5] If the case at hand also violates
the False Claims Act, in addition to the Sherman Act, private individuals may also
bring a civil action in the name of the United States under the Qui Tam provision
of The False Claims Act.
Under American law, exchanging prices among competitors can also violate
the antitrust laws. That includes exchanging prices with the intent to fix prices or
the exchange affecting the prices individual competitors set. Proof that
competitors have shared prices can be used as part of the evidence of an illegal
price fixing agreement.[6] Experts generally advise that competitors avoid even the
appearance of agreeing on price.[7]
Since 1997, US courts have divided price fixing into two categories: vertical and
horizontal maximum price fixing.[8] Vertical price fixing includes a manufacturer's
attempt to control the price of its product at retail.[9] In State Oil Co. v. Khan,
[10]
 the US Supreme Court held that vertical price fixing is no longer considered
a per se violation of the Sherman Act, but horizontal price fixing is still considered
a breach of the Sherman Act. Also in 2008, the defendants of United States v LG
Display Co., United States v. Chunghwa Picture Tubes, and United States v.
Sharp Corporation, heard in the Northern District of California, agreed to pay a
total sum of $585 million to settle their prosecutions for conspiring to fix prices of
liquid crystal display panels. That was the second largest amount awarded under
the Sherman Act in history.[8]
Canada[edit]
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.[11] 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.[12]
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[edit]
Price fixing is illegal in Australia under the Competition and Consumer Act 2010,
with considerably similar prohibitions to the US and Canadian prohibitions. The
Act is administered and enforced by the Australian Competition and Consumer
Commission. Section 48 of the Competition and Consumer Act 2010 (Cth)
explicitly states, "A corporation shall not engage in the practise of resale price
maintenance." A broader understanding of the statutory provision is in Section
96(3)of the Competition and Consumer Act 2010 (Cth), which broadly defines
what can be resale price maintenance.
New Zealand[edit]
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.[13]
[14]

European Union[edit]
Under the EU commission's leniency programme, whistleblowing firms that co-
operate with the antitrust authority see their prospective penalties either wiped
out or reduced.[15]
United Kingdom[edit]
British competition law prohibits almost any attempt to fix prices.[16]
The Net Book Agreement was a public agreement between UK booksellers from
1900 to 1991 to sell new books only at the recommended retail price to protect
the revenues of smaller bookshops. The agreement collapsed in 1991, when the
large book chain Dillons began discounting books, followed by rival Waterstones.
[17][18]

However, price-fixing is still legal in the magazine and newspaper distribution

industry. 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[edit]
When the agreement to control price is sanctioned by a multilateral treaty or is
entered by sovereign nations as opposed to individual firms, the cartel may be
protected from lawsuits and criminal antitrust prosecution. That is why OPEC, the
global petroleum cartel, has not been prosecuted or successfully sued under US
antitrust law.
International airline tickets have their prices fixed by agreement with the IATA, a
practice for which there is a specific exemption in antitrust law.[19][better  source  needed]

Examples[edit]
Compact discs[edit]
Main article: CD price fixing
Between 1995 and 2000 music companies were found to have used illegal
marketing agreements such as minimum advertised pricing to artificially inflate
prices of compact discs in order to end price wars by discounters such as Best
Buy and Target in the early 1990s. It is estimated customers were overcharged
by nearly $500 million and up to $5 per album. A settlement in 2002 included the
music publishers and distributors; Sony Music, Warner Music, Bertelsmann
Music Group, EMI Music, Universal Music as well as retailers Musicland, Trans
World Entertainment and Tower Records. In restitution for price fixing they
agreed to pay a $67.4 million fine distribute $75.7 million in CDs to public and
non-profit groups.
Dynamic random access memory (DRAM)[edit]
Main article: DRAM price fixing
In October 2005, the Korean company Samsung pleaded guilty to conspiring with
other companies, including Infineon and Hynix Semiconductor, to fix the price of
dynamic random access memory (DRAM) chips. Samsung was the third
company to be charged in connection with the international cartel and was fined
$300 million, the second largest antitrust penalty in US history.
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 U.S. Department of Justice with their ongoing investigation of
the conspiracy.
Capacitors[edit]
In March 2018, the European Commission fined eight firms, mostly Japanese
companies, €254 million for operating an illegal price cartel for capacitors[20]. The
two largest players were Nippon Chemi-Con which was fined €98 million
and Hitachi Chemical which was fined €18 million[20].
Perfume[edit]
In 2006, the government of France fined 13 perfume brands and three vendors
for price collusion between 1997 and 2000. The brands include L'Oréal (4.1mil
euro), Pacific Creation Perfumes (90,000 euro), Chanel, LVMH's Sephora (9.4mil
euro) and Hutchison Whampoa's Marionnaud (12.8mil euro).[21]
Liquid crystal display[edit]
In 2008 in the US, LG Display Co., Chunghwa Picture Tubes and Sharp Corp.,
agreed to plead guilty and pay $585 million in criminal fines[22][23] for conspiring to
fix prices of liquid crystal display panels.
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.[24]
In 2010, the EU fined LG Display €215 million for its part in the LCD price fixing
scheme.[25] Other companies were fined for a combined total of €648.9 million,
including Chimei Innolux, AU Optronics, Chunghwa Picture Tubes Ltd.,
and HannStar Display Corp..[26] LG Display said it is considering appealing the
fine.[27]
Air cargo market[edit]
In late 2005/early 2006, Lufthansa and Virgin Atlantic came forward about their
involvement in large price-fixing schemes for cargo and passenger surcharges in
which 21 airlines were involved since 2000 (amongst which were British
Airways, Korean Air, and Air France-KLM). U.S. Department of Justice fined the
airlines a total of $1.7 billion, charged 19 executives with wrongdoing and four
received prison terms.[28]
In December 2008, the New Zealand Commerce Commission filed legal
proceedings against 13 airlines in the New Zealand High Court. According to the
Commission, the carriers "colluded to raise the price of [freight] by imposing fuel
charges for more than seven years".[29] In 2013 Air New Zealand was the final
airline of the 13 to settle.[30]
The Commission noted that it might involve up to 60 airlines.[31] 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.[29]

Criticism on legislation[edit]
Economic liberals believe that price fixing is a voluntary and consensual activity
between parties that should be free from government compulsion and
government interference. At times price fixing ensures a stable market for both
consumers and producers. Any short term benefit of increased price competition
will force some producers out of the market and cause product shortages and
prices for consumers to rise. In the end price-fixing legislation forces producers
out of a market because it can't compete with the biggest discounter and the
market winds up a monopoly anyway. [32]

https://en.wikipedia.org/wiki/Price_fixing