Price-fixing occurs when competing businesses conspire to agree to sell the same products at the same price. Consumers expect that they will have a choice in what to buy based in part upon its price, which they expect to be influenced by supply and demand. Price-fixing subverts these expectations, and often leads to higher prices for the same commodities.
The Sherman Act
The Sherman Act makes any conspiracy in the restraint of free trade illegal. While the Sherman Act only prohibits unreasonable trade restraints, some acts such as price-fixing are considered “per se” violations of the Sherman Act. This means that defendants in these cases cannot offer a justification for their actions except to argue that no agreement existed at all.
While sometimes price-fixing is overt, as it may be if there is a written agreement to fix prices, other times these agreements are made on the sly and kept hushed up. Still, if circumstantial evidence points to price-fixing, the arrangement may be found illegal.
Penalties for price fixing
If a business is found to have engaged in price-fixing, those responsible could be sentenced to imprisonment and subjected to millions in fines. The Federal Trade Commission (FTC) may also pursue a civil enforcement action against the responsible individuals or businesses.
Normal ups and downs in the market
Just because two competitors offer the same price for a product does not necessarily mean price-fixing has occurred.
Prices may be the same if the products themselves are identical or if the price of components needed to manufacture the product goes up or down without any collusion. In addition, sometimes prices increase across the board due to normal supply and demand in the free market and other market conditions that affect all sellers of the product.
So, while price-fixing is unlawful, the mere fact that prices are the same amongst competitors does not always mean price-fixing occurred. But true price-fixing is generally an automatic violation of federal antitrust laws, with few defenses.