Price Fixing

AAA

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.

RELATED TERMS
  1. Unfair Trade Practice

    Using various deceptive, fraudulent or unethical methods to obtain ...
  2. Price Leadership

    When a firm that is the leader in its sector determines the price ...
  3. Bid Rigging

    A scheme in which businesses collude so that a competing business ...
  4. Price Skimming

    A product pricing strategy by which a firm charges the highest ...
  5. Antitrust

    The antitrust laws apply to virtually all industries and to every ...
  6. Monopoly

    A situation in which a single company or group owns all or nearly ...
RELATED FAQS
  1. What are examples of businesses that exhibit social responsibility?

    In the 21st century, companies that exhibit corporate social responsibility are winning high marks from consumers and investors ... Read Full Answer >>
  2. Why is social responsibility important to a business?

    Social responsibility is important to a business because it demonstrates to both consumers and the media that the company ... Read Full Answer >>
  3. Why are business ethics important?

    Several factors play a role in the success of a company that are beyond the scope of financial statements alone. Organizational ... Read Full Answer >>
  4. How important are business ethics in running a profitable business?

    A number of factors play a part in making a business profitable, including expert management teams, dedicated and productive ... Read Full Answer >>
  5. How do business ethics differ among various countries?

    Business ethics is the study of business policies and practices, such as corporate governance, insider trading, bribery, ... Read Full Answer >>
  6. What was Rupert Murdoch's role in the wiretapping scandal?

    According to Rupert Murdoch, he had no direct role in the wiretapping scandal involving the now-defunct news tabloid “News ... Read Full Answer >>
Related Articles
  1. Trading Strategies

    Setting Vs. Getting: What Is A Price-Taker?

    Learn how the economic term "price taker" may separate investors from traders.
  2. Personal Finance

    Early Monopolies: Conquest And Corruption

    This structure can be very effective, but it is also known for its abuse of power.
  3. Fundamental Analysis

    4 Misconceptions About Free Markets

    These fallacies have hounded free market economists since the days of Adam Smith.
  4. Personal Finance

    A History Of U.S. Monopolies

    These monoliths helped develop the economy and infrastructure at the expense of competition.
  5. Personal Finance

    Antitrust Defined

    Check out the history and reasons behind antitrust laws, as well as the arguments over them.
  6. Economics

    Do Cheap Imported Goods Cost Americans Jobs?

    Flooding the market with cheap products can mean job losses and even market collapse - but dumping isn't as threatening as it seems.
  7. Insurance

    Free Markets: What's The Cost?

    Some argue that when the free market fails to protect consumers, government regulation is required.
  8. Investing Basics

    Understanding Related-Party Transactions

    In business, a related-party transaction refers to a transaction where parties on both sides have a common interest or relationship.
  9. Economics

    What are Deliverables?

    Deliverables is a project management term describing an object or function that must be provided or completed by a certain due date.
  10. Investing

    How Counterfeiting Affects Alibaba's Business

    We examine the source of Alibaba's counterfeit products and their effects, as well as the ways Alibaba is fighting back.

You May Also Like

Hot Definitions
  1. American Dream

    The belief that anyone, regardless of where they were born or what class they were born into, can attain their own version ...
  2. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  3. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
  4. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  5. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  6. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!