DEFINITION of 'Price Fixing'
Establishing the price of a product or service, rather than allowing it to be determined naturally through free-market forces. Antitrust legislation makes it illegal for businesses to decide to fix their prices under specific circumstances. However, there is no legal protection against government price fixing. In an ill-fated attempt to end the Great Depression, for example, Franklin Roosevelt forced businesses to fix prices in the 1930s. However, this action may have actually prolonged the downturn.
INVESTOPEDIA EXPLAINS 'Price Fixing'
Some economists believe antitrust laws are unnecessary because the free market already contains several built-in guards against price fixing. Consumers who believe that an item is priced unfairly high can do any of the following:
• Purchase a substitute good or service that is lower-priced
• Decrease their consumption for the good, making it unprofitable for businesses to keep prices fixed
• Buy the product from another country
Distrust among companies in a price fixing arrangement also acts as a barrier to continued manipulation. And, if all those fail, price fixing usually breaks down because of the power of large buyers to negotiate the price they are willing to pay.
Using various deceptive, fraudulent or unethical methods to obtain ...
When a firm that is the leader in its sector determines the price ...
A scheme in which businesses collude so that a competing business ...
The antitrust laws apply to virtually all industries and to every ...
A situation in which a single company or group owns all or nearly ...
A product pricing strategy by which a firm charges the highest ...