What is Price Fixing
You must have come across the term Price Fixing, but have you ever tried to know the actual meaning of this term. Price Fixing is actually an agreement between same types of businessmen or service providers to sale their commodities or services at the fixed rate. In other word such situations are created, that keeping the price stable remains easy. Cartel is the terms used for the group of people engaged in deciding the fixed rate of any commodity. The basic reason of Price Fixing is to make maximum revenues on selling the same type of products. It can be further taken positively as an effort to stable prices.
Is Price Fixing against Law?
More often not it’s a violation to laws, since it’s a barrier in fair competition. As prices are fixed, it’s quite obvious that competition level will fall down and ultimately consumer is on the receiving end. Controlling market price is definitely against law. Public will not be offered the benefits of competition and thus, bargaining rights are no more useful. As far as legality is concerned Price Fixing is considered illegal when dealers make agreement to fix rates. As an individual business organization, you have every right to set the prices in order to earn maximum benefits. But entering into agreements to make sure other traders also implement the same policy is against law. Without entering in any such agreements, if a business makes decision to keep the prices fixed at high rates, there is nothing wrong.
Happening of Price Fixing, there is no hard and fast rule. Initially traders dealing in same type of commodities make an agreement to keep the price tag high and fixed. What it does is ultimate user is left with the only option of purchasing at fixed high rates. Preplanned discounts are associated just as a formality, that even after offering certain rate of discount they make huge margin on each sale. Often it starts with manufacturers, where prices are kept high so that retailers will be compelled to present those commodities at higher rates.
Manipulation in prices among a group of traders for maximum benefits through high prices is concerned as Price Fixing. The basic purpose is to offer revenues to a specific group or corporate. Take an example of sugar stores. Five competitors enter in an agreement that they all will sale their product at the same rate that is quite high in comparison to current prices. It will make the buyer to pay extra amount for such commodity. There is no other choice for a consumer and it often results in dissatisfaction towards administration.