Three Companies Secretly Enter Into A Price Agreement

13 Apr

According to, the practice of “conscious parallelism” is not a strict agreement, as it is not due to agreements between companies. Instead, it is a situation that produces the same results of collusion without actual consultation. The general feeling of competitors is that they should charge the same price for similar products. For example, when an oil company raises its gasoline prices due to higher production costs, other oil companies may follow, even if they are no longer responsible for their own production costs. If all suppliers decide to increase prices at the same time, this goes beyond the framework of input cost changes. Price fixing is an agreement between participants of the same party in a market, product, service or property only at a fixed price, or to maintain market conditions so that the price is maintained at a level determined by supply and demand control. If the price of a new supplier is less than the normal offer price of the company, it may be an agreement between existing suppliers. Like cargo, many products are now transported by freight through different channels. If freight prices artificially increase, this will have an impact on the entire supply chain. For example, this will lead to higher prices for goods and services and will have an impact on consumer choice. [36] Gambling theory suggests that cartels are inherently unstable because the behaviour of cartel members is a prisoner`s dilemma. Any cartel member would be able to make a higher profit, at least in the short term, by breaking the agreement (a larger quantity produced or sold at a lower price) than it would under the agreement.

However, if the deal collapses because of resignations, companies will return to competition, profits would go down and things would be worse. In the United States, price-fixing may be prosecuted as a criminal act committed by the Confederation under Section 1 of the Sherman Antitrust Act. [3] In late 2005/early 2006, Lufthansa and Virgin Atlantic notified their participation in significant freight and passenger surcharge pricing agreements involving 21 airlines since 2000 (including British Airways, Korean Air and Air France-KLM). The U.S. Department of Justice fined the airlines a total of $1.7 billion, 19 executives for misconduct and four were sentenced to prison. [30] OPEC: OPEC oil-producing countries have been working temporarily to raise global oil prices in order to achieve a stable income. Like the prisoner`s dilemma, cooperation in an oligopoly is difficult to maintain, because cooperation is not in the best interests of the various actors. However, the collective bottom line would be improved if companies cooperated and were thus able to maintain low production, high prices and monopolistic profits. Between 1995 and 2000, it was found that music companies used illicit marketing agreements, such as minimum prices to artificially increase CD prices, to end the price wars of discount stores such as Best Buy and Target in the early 1990s.

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Posted Apr 13th, 2021

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