By: Tselmuun Chinuukhei
Combating cartels and price fixing are key to safeguarding competition and providing fair market conditions. Cartels are an agreement or cooperation between two or more competing firms to restrict competition in the market, often involving companies in the same industry coming together to coordinate their actions to produce favorable market outcomes. Cartels aim to control prices, limit production, allocate markets, or rig bids.
Price fixing is a specific form of cartel behavior where competitors agree to set prices at a predetermined level rather than allowing market forces to determine costs. This eliminates price competition and harms consumers by artificially inflating prices. Price fixing can take various forms, including setting minimum or maximum prices, price discounts or rebates, or establishing price formulas. Price fixing styles are when it takes place either vertically or horizontally.
Horizontal price fixing, on the other hand, entails agreements between direct competitors who operate at the same supply chain level. For instance, rival businesses in the same sector may decide to fix prices or segment markets geographically to prevent competition.
Vertical price fixing happens when businesses at various levels of the supply chain, like manufacturers and retailers, collude. Resale price maintenance is a type of vertical price fixing when a manufacturer establishes a minimum price at which a merchant must sell its goods. Cartels and price fixing are banned in the majority of jurisdictions because they hurt consumers and competition. Antitrust laws are actively investigated and enforced by antitrust enforcement organizations. Serious penalties, including fines, criminal charges, and civil damages, may be imposed on offenders. There are leniency programs in several countries that provide lower punishments or immunity to cartel members who come forward and assist with law enforcement.
Examples of cartel cases include the price-fixing case for lysine involving numerous international corporations, the LCD panel cartel, and the auto parts cartel, where manufacturers banded together to fix prices and allocate customers.
To foster fair markets, defend consumer interests, and protect competition, antitrust agencies around the world continuously monitor and look into cartel activity.
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