Price Fixing

Price fixing is an anticompetitive agreement in which market participants on the same side—either sellers or buyers—agree to buy or sell a product, service or commodity only at a predetermined price or under coordinated market conditions. Such arrangements undermine competitive market forces by manipulating supply, demand or pricing structures to secure mutual economic benefit. Price fixing may involve raising prices, stabilising them, preventing discounting or establishing common costs, terms or commercial practices. The defining feature is the existence of an agreement—explicit or implicit—between competitors to influence price.

Nature and Mechanisms of Price Fixing

Price fixing typically operates through conspiratorial coordination among firms. Sellers or buyers may implement measures such as:

• establishing uniform retail prices or minimum resale prices
• agreeing not to reduce prices below a specific threshold
• adopting common list prices or price books
• using unified discount or credit terms
• discontinuing free services to increase effective pricing
• restricting supply or production to elevate market prices
• pooling markets, territories or customer bases to limit competition

These practices aim to prevent price competition and ensure stable or increased margins for participants. Although superficially similar price movements occur naturally in competitive markets—such as simultaneous price changes in agricultural commodities caused by weather patterns or demand fluctuations—price fixing is distinguishable by the presence of intentional coordination.
From the perspective of neoclassical economics, price fixing is inefficient because it transfers consumer surplus to producers and generates deadweight loss by elevating prices above competitive levels. Many countries prohibit such agreements and prosecute domestic and international cartels that distort market outcomes.

International Price-Fixing Cartels

A number of high-profile international cartels have been prosecuted for coordinating prices and production quantities across borders. Examples include conspiracies involving lysine, citric acid, graphite electrodes and bulk vitamins. Enforcement agencies across jurisdictions collaborate to detect and dismantle such global arrangements.

Legal Frameworks

United States

Under Section 1 of the Sherman Antitrust Act, price fixing is a criminal federal offence. The Department of Justice (DOJ) prosecutes criminal violations, while the Federal Trade Commission oversees civil enforcement. State attorneys general also pursue antitrust claims. Private parties may bring civil actions seeking treble damages, costs and, where applicable, attorneys’ fees.
Exchange of pricing information among competitors can constitute evidence of unlawful coordination. Courts differentiate between:

• horizontal price fixing, involving direct competitors; and
• vertical price fixing, involving arrangements between suppliers and retailers.

Horizontal price fixing remains a per se violation, whereas vertical maximum price fixing, following State Oil Co. v. Khan, is analysed under more flexible standards. Major cases such as United States v. LG Display Co. have resulted in substantial penalties for conspiracies involving LCD panels.

Canada

Price fixing is an indictable criminal offence under Section 45 of the Competition Act. Related practices such as bid-rigging are likewise criminalised. Enforcement is administered by the Competition Bureau, and penalties may include fines and imprisonment.

Australia

The Competition and Consumer Act 2010 prohibits price fixing and resale price maintenance. Section 48 directly bans resale price maintenance, supported by broader provisions defining prohibited conduct. The Australian Competition and Consumer Commission enforces the Act.

New Zealand

The Commerce Act 1986 prohibits price fixing and other forms of anticompetitive coordination. The Commerce Commission conducts investigations and enforcement proceedings.

European Union

EU competition law strictly bans price fixing under Article 101 of the Treaty on the Functioning of the European Union. The European Commission’s leniency programme encourages firms to disclose participation in cartels in exchange for reduced penalties.

United Kingdom

UK competition law prohibits attempts to fix prices under the Competition Act 1998. Historically, the Net Book Agreement (1900–1991) permitted fixed book prices, but it eventually collapsed following widespread discounting. Certain exceptions still survive in sectors such as magazine and newspaper distribution.

Exemptions

When price coordination arises from multilateral treaties or agreements among sovereign states, it may be exempt from antitrust prosecution. OPEC’s coordinated petroleum pricing is an example of a state-sanctioned arrangement. International airline ticket prices set under IATA frameworks have also been subject to specific exemptions.

Illustrative Cases

• Compact discs (1995–2000): Labels and retailers used resale price maintenance to maintain elevated CD prices. A 2002 settlement required payment of substantial fines and distribution of CDs to public institutions.
• DRAM (dynamic random-access memory): Samsung and other firms pleaded guilty to price-fixing conspiracies, resulting in large fines and criminal convictions of executives.
• Capacitors (2018): The European Commission fined several firms for operating a long-term cartel affecting capacitor prices.
• Perfume pricing (1997–2000): French authorities fined major perfume brands and retailers for collusive price-setting.
• LCD panels: Various companies faced penalties for conspiring to fix prices of liquid crystal display components.

Market Forces and Distinct Phenomena

Not all price similarities constitute price fixing. Markets for homogeneous commodities, such as wheat, often exhibit comparable pricing because products lack differentiation. External events—storms, supply shocks or surges in demand—may cause simultaneous price increases independent of coordination. The legal standard requires evidence of agreement, not merely parallel conduct.