Price fixing occurs when two or more firms agree to set prices for their goods or services regardless of market conditions or the reactions of the consumers. This type of fixing is usually illegal because it creates an unfettered market and is considered to be a form of collusion which is a violation of antitrust laws. In the US, it is illegal for competitors to agree on prices and it’s known as per-se illegal price fixing.

Prior to this, cartels were used to fix prices and members were rewarded with excess profits as a reward for taking part in an illegal scheme to restrict the competition. This type of practice is highly unethical and often criminalized throughout the world.

When companies are caught price fixing they are typically fined and the individuals involved may be held criminally liable. Aside from antitrust concerns, price fixing can also lead to a lack of true competition and can lead to higher prices for goods and services for consumers. For example, if two or more firms agree to keep the price of a product high, consumers will have to pay more for the goods and services than they otherwise would.

Aside from antitrust concerns, price fixing also hurts the competitiveness of firms and can be harmful to the overall economy. When companies engage in price fixing, smaller companies may not be able to compete, which can lead to an oligopolistic market. This can lead to an increase in prices, less choice for consumers, and overall reduced innovation. Additionally, price fixing can lead to a decrease in employment as firms will be less likely to hire if they are not making as much as they could be by fixing prices.

Price fixing may be illegal, but it still occurs across a variety of industries and in different forms. Companies may fix prices orally or in written agreements, and they may do it through complex webs of middlemen who can “anonymously” pass along directions. Price agreements can also be disguised in so-called “fair trade” campaigns. Consumers should always keep an eye out for signs of price fixing such as suspiciously consistent prices across competitors or price changes that seem to be coordinated.

Overall, price fixing is an illegal practice that can be a detriment to both businesses and consumers. It is important to be aware of it and take note of any signs of activity as it could be a major issue for the economy as a whole.