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Warning
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Simple English definitions for legal terms
Price fixing
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A quick definition of Price fixing:
Price fixing: When companies agree to set the same price for their products or services, it's called price fixing. This is illegal because it can hurt customers by making prices higher and limiting choices. Companies should compete fairly and set their own prices based on what people are willing to pay. If they work together to set prices, it's against the law.
A more thorough explanation:
Definition: Price fixing is when competitors make an agreement to raise, lower, or keep prices the same for their products or services. This is illegal because it can harm consumers by leading to higher prices or the elimination of competition. In a free market, competitors should set their prices based on supply and demand, not agreements with each other.
Examples:
- Horizontal Price Fixing: Two competing fast-food chains agree to charge the same price for their cheeseburgers. This is illegal because it eliminates competition and can lead to higher prices for consumers.
- Vertical Price Fixing: A manufacturer of a popular product requires retailers to sell it at a specific price, or else they won't be allowed to sell it at all. This is also illegal because it eliminates competition and can lead to higher prices for consumers.
Both of these examples illustrate price fixing because they involve competitors making agreements to set prices instead of competing freely in the market. This harms consumers because it can lead to higher prices and less choice. That's why price fixing is illegal under antitrust laws.