Be careful folks...what you need to know about pricing

[Beth n Rod 1,278]

From time to time you hear about instances where people attempt to influence the outcome of a bidding process by way of working with others to set pricing for a group and then bidding together, the outcome of course is that the work is shared and the job was a lock to begin with. Below is information on this practice, which is against the law. It is worth reading no matter how long you have been in business.

Price fixing - Wikipedia, the free encyclopedia

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 group of market makers involved in price fixing is sometimes referred to as a cartel.

Price fixing may be intended to push the price of a product as high as possible, leading to profits for all sellers, but it 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 two or more sellers or buyers; the purpose is to coordinate pricing for mutual benefit of the traders. Sellers might agree to sell at a common target price; set a common 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.

In the United States, price fixing can be prosecuted as a criminal federal offense under section 1 of the Sherman Antitrust Act.[2] Prosecutions may be handled by the U.S. Department of Justice or by the Federal Trade Commission. Many State Attorneys General also bring antitrust cases and have antitrust offices, such as Virginia, New York, and California. Private individuals or organizations can bring their own lawsuits for triple damages for antitrust violations and also recover attorneys fees..[3]

Colluding on price amongst competitors, also known as horizontal price fixing, is viewed as a per se violation of the Sherman Act regardless of the market impact or alleged efficiency of the action. In 2007, the U.S. Supreme Court ruled that vertical price fixing by a manufacturer and its retailers, also known as retail price maintenance, is not a per se violation.

Under American law, exchanging prices among competitors can also violate the antitrust laws. This includes exchanging prices with either the intent to fix prices or if the exchange affects 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.[4] Experts generally advise that competitors avoid even the appearance of agreeing on price.[5]

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.[6] It does not matter if the price agreed upon is reasonable or for a good or altruistic cause; or if the agreement is explicit and formal or 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, banning price advertising, or agreeing to adhere to prices that one announces.[7] 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.

“Antitrust” redirects here. For the 2001 film, see Antitrust (film). For laws specific to the U.S., see United States antitrust law.

Competition law, known in the United States as antitrust law, are laws that promote or maintain market competition by regulating anti-competitive conduct.[1]

The history of competition law reaches back to the Roman Empire. The business practices of market traders, guilds and governments have always been subject to scrutiny, and sometimes severe sanctions. Since the twentieth century, competition law has become global. The two largest and most influential systems of competition regulation are United States antitrust law and European Union competition law. National and regional competition authorities across the world have formed international support and enforcement networks.

Modern competition law has historically evolved on a country level to promote and maintain competition in markets principally within the territorial boundaries of nation-states. National competition law usually does not cover activity beyond territorial borders unless it has significant effects at nation-state level.[2]

The protection of international competition is governed by international competition agreements. In 1945, during the negotiations preceding the adoption of the General Agreement on Tariffs and Trade (GATT) in 1947, limited international competition obligations were proposed within the Charter for an International Trade Organisation. These obligations were not included in GATT, but in 1994, with the conclusion of the Uruguay Round of GATT Multilateral Negotiations, the World Trade Organisation (WTO) was created. The Agreement Establishing the WTO included a range of limited provisions on various cross-border competition issues on a sector specific basis.[3]