Price fixing

In the United States, price fixing can be prosecuted as a criminal federal offense under Section 1 of the Sherman Antitrust Act.[3]

Criminal prosecutions must be handled by the U.S. Department of Justice, but the Federal Trade Commission also has jurisdiction for civil antitrust violations. Many state attorneys general also bring antitrust cases and have antitrust offices, such as Virginia, New York, and California. Further, where price fixing is used as an artifice to defraud a U.S. government agency into paying more than market value, the U.S. attorney may proceed under the False Claims Act.

Private individuals or organizations may file lawsuits for triple damages for antitrust violations and, depending on the law, recover attorneys fees and costs expended on prosecution of a case.[4][5][6] If the case at hand also violates the False Claims Act, in addition to the Sherman Act, private individuals may also bring a civil action in the name of the United States under the Qui Tam provision of The False Claims Act.

Under American law, exchanging prices among competitors can also violate the antitrust laws. That includes exchanging prices with the intent to fix prices or the exchange affecting the prices individual competitors set. Proof that competitors have shared prices can be used as part of the evidence of an illegal price fixing agreement.[7] Experts generally advise that competitors avoid even the appearance of agreeing on price.[8]

Since 1997, US courts have divided price fixing into two categories: vertical and horizontal maximum price fixing.[9] Vertical price fixing includes a manufacturer's attempt to control the price of its product at retail.[10] In State Oil Co. v. Khan,[11] the US Supreme Court held that vertical price fixing is no longer considered a per se violation of the Sherman Act, but horizontal price fixing is still considered a breach of the Sherman Act. Also in 2008, the defendants of United States v LG Display Co., United States v. Chunghwa Picture Tubes, and United States v. Sharp Corporation, heard in the Northern District of California, agreed to pay a total sum of $585 million to settle their prosecutions for conspiring to fix prices of liquid crystal display panels. That was the second largest amount awarded under the Sherman Act in history.[9]

In Canada, it is an indictable criminal offence under Section 45 of the Competition Act. Bid rigging is considered a form of price fixing and is illegal in both the United States (s.1 Sherman Act) and Canada (s.47 Competition Act). In the United States, agreements to fix, raise, lower, stabilize, or otherwise set a price are illegal per se.[12] It does not matter if the price agreed upon is reasonable or for a good or altruistic cause or the agreement is unspoken and tacit. In the United States, price-fixing also includes agreements to hold prices the same, discount prices (even if based on financial need or income), set credit terms, agree on a price schedule or scale, adopt a common formula to figure prices, ban price advertising, or agree to adhere to prices that are announced.[13]

Although price fixing usually means sellers agreeing on price, it can also include agreements among buyers to fix the price at which they will buy products.

Price fixing is illegal in Australia under the Competition and Consumer Act 2010, with considerably similar prohibitions to the US and Canadian prohibitions. The Act is administered and enforced by the Australian Competition and Consumer Commission. Section 48 of the Competition and Consumer Act 2010 (Cth) explicitly states, "A corporation shall not engage in the practise of resale price maintenance." A broader understanding of the statutory provision is in Section 96(3)of the Competition and Consumer Act 2010 (Cth), which broadly defines what can be resale price maintenance.

New Zealand law prohibits price fixing, among most other anti-competitive behaviours under the Commerce Act 1986. The act covers practices similar to that of US and Canadian law, and it is enforced by the Commerce Commission.[14][15]

Under the EU commission's leniency programme, whistleblowing firms that co-operate with the antitrust authority see their prospective penalties either wiped out or reduced.[16]

British competition law prohibits almost any attempt to fix prices.[17]

The Net Book Agreement was a public agreement between UK booksellers from 1900 to 1991 to sell new books only at the recommended retail price to protect the revenues of smaller bookshops. The agreement collapsed in 1991, when the large book chain Dillons began discounting books, followed by rival Waterstones.[18][19]

However, price-fixing is still legal in the magazine and newspaper distribution industry, and sometimes in the motion picture industry.[20] Retailers who sell at below cover price are subject to withdrawal of supply. The Office of Fair Trading has given its approval to the status quo.

Between 1995 and 2000 music companies were found to have used illegal marketing agreements such as minimum advertised pricing to artificially inflate prices of compact discs in order to end price wars by discounters such as Best Buy and Target in the early 1990s. It is estimated customers were overcharged by nearly $500 million and up to $5 per album. A settlement in 2002 included the music publishers and distributors; Sony Music, Warner Music, Bertelsmann Music Group, EMI Music, Universal Music as well as retailers Musicland, Trans World Entertainment and Tower Records. In restitution for price fixing they agreed to pay a $67.4 million fine distribute $75.7 million in CDs to public and non-profit groups.

In October 2005, the Korean company Samsung pleaded guilty to conspiring with other companies, including Infineon and Hynix Semiconductor, to fix the price of dynamic random access memory (DRAM) chips. Samsung was the third company to be charged in connection with the international cartel and was fined $300 million, the second largest antitrust penalty in US history.

In October 2004, four executives from Infineon, a German chip maker, received reduced sentences of 4 to 6 months in federal prison and $250,000 in fines after agreeing to aid the U.S. Department of Justice with their ongoing investigation of the conspiracy.

In March 2018, the European Commission fined eight firms, mostly Japanese companies, €254 million for operating an illegal price cartel for capacitors.[22] The two largest players were Nippon Chemi-Con which was fined €98 million and Hitachi Chemical which was fined €18 million.[22]

In 2006, the government of France fined 13 perfume brands and three vendors for price collusion between 1997 and 2000. The brands include L'Oréal (€4.1 million), Pacific Creation Perfumes (€90,000), Chanel, LVMH's Sephora (€9.4 million) and Hutchison Whampoa's Marionnaud (€12.8 million).[23]

In 2008 in the US, LG Display Co., Chunghwa Picture Tubes and Sharp Corp., agreed to plead guilty and pay $585 million in criminal fines[24][25] for conspiring to fix prices of liquid crystal display panels.

South Korea–based LG Display would pay $400 million, the second-highest criminal fine that the US Justice Department antitrust division has ever imposed. Chunghwa would pay $65 million for conspiring with LG Display and other unnamed companies and Sharp would pay $120 million, according to the department.[26]

In 2010, the EU fined LG Display €215 million for its part in the LCD price fixing scheme.[27] Other companies were fined for a combined total of €648.9 million, including Chimei Innolux, AU Optronics, Chunghwa Picture Tubes Ltd., and HannStar Display Corp..[28] LG Display said it is considering appealing the fine.[29]

In late 2005/early 2006, Lufthansa and Virgin Atlantic came forward about their involvement in large price-fixing schemes for cargo and passenger surcharges in which 21 airlines were involved since 2000 (amongst which were British Airways, Korean Air, and Air France-KLM). U.S. Department of Justice fined the airlines a total of $1.7 billion, charged 19 executives with wrongdoing and four received prison terms.[30]

In December 2008, the New Zealand Commerce Commission filed legal proceedings against 13 airlines in the New Zealand High Court. According to the Commission, the carriers "colluded to raise the price of [freight] by imposing fuel charges for more than seven years".[31] In 2013 Air New Zealand was the final airline of the 13 to settle.[32]

The Commission noted that it might involve up to 60 airlines.[33] In 2009 the Commission said overseas competition authorities were also investigating the air cargo market, including the US and Australia where fines had been imposed.[31]

An attempt to fix the price of tuna resulted in a $25 million fine for Bumble Bee Foods in 2017 and a $100 million fine for StarKist in 2020. Christopher Lischewski, the former CEO of Bumble Bee, was sentenced to 40 months in jail and fined $100,000 for his 2010–2013 involvement.[34]

During the COVID-19 pandemic, companies such as Pfizer and Moderna announced rates for their coronavirus vaccines that would differ based on deals established with various governments. Executive orders were enacted in the United States to lower prescription drug costs which was claimed by Pfizer's CEO to cause "enormous destruction" to the pharmaceutical industry.[35]