Encyclopedia > Price fixing

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Price fixing

Any agreement between competitors regarding price is considered price fixing and is illegal in many countries.

Methods of price fixing can include,

  • Agreements to adhere to a price book.
  • Agreements to engage in cooperative price advertising.
  • An agreement to standardize credit terms offered to purchasers.
  • Agreements to use uniform trade-in allowances.
  • Agreements to limit discounts.
  • Agreements to discontinue free service or to fix any other element of prices.
  • Agreement to adhere to previously announced prices and terms of sale.
  • Agreements establishing uniform costs and markups.
  • Agreements imposing mandatory surcharges.

Bid rigging[?] is sometimes regarded as price fixing.

There are persistent allegations that the record industry engages in price fixing as a standard business practice. Athough illegal, one example of the possible reasoning runs as follows:

  • price fixing keeps CDs in the United States artificially expensive to the tune of $480 million since 1997 (source: [1] (http://www.usatoday.com/life/music/news/2002-09-30-cd-settlement_x.htm))
  • the states sue
  • the record companies settle the lawsuit for a fine of $67.4 million and distribute $75.7 million in CDs (source: as above)
  • $480m - ($67.4m + $75.7m) = $336.9m profit!

See also: Antitrust law, cartel, monopoly, oligopoly

External links:

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