How to Identify Instances of Price Fixing
Compare prices across markets.If you suspect you're paying artificially high prices, find out what the same product costs in another region of the country., Pay attention to prices that move in tandem., Ask sellers why discounts were phased out...
Step-by-Step Guide
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Step 1: Compare prices across markets.If you suspect you're paying artificially high prices
If the seller is a large company with a national or global reach, you should even check for price differences within the company.
While price fixing is almost always practiced by large companies, it isn't always practiced by the entire company--a regional division might be colluding locally with other "competitors."For example, say the price of 8”x8”x16” concrete blocks averages $1.75 per block in your region, no matter which supplier you go to.
This seems high to you, so you call up a friend in another state, who tells you that he pays about $1.25.
When you look online, you see a range of prices, but nothing higher than $1.39 per block.
Since the same type of concrete blocks should cost about the same wherever you go, this might be a detail worth investigating -
Step 2: find out what the same product costs in another region of the country.
Just because prices aren’t exactly the same at every vendor doesn’t mean price fixing isn’t occurring.
In a perfect competitive market, each seller tries to gain advantages over the others.
That should mean the sellers' prices rise and fall at different rates as each one tries to sell for less or deliver more.
In a fixed market, the prices might rise and fall in tandem with one another, even if they aren’t exactly the same.
For instance, AAA Cola caters toward the higher end of the soda market.
They sell a bottle of AAA for $1.50.
C+ Cola focuses on the bottom end of the market.
They sell the same size bottle for $1.00.
One day you notice a bottle of AAA now costs $1.75.
When you go to pick up a bottle of C+ instead, you realize that it’s $1.25 per bottle.
You notice that sugar and gas are the same price as they’ve always been—why the sudden increase in the price of cola? It's tough to say, but it's worth investigating. , It’s much easier to eliminate a discount than it is to raise a price, even if they really amount to the same thing.
There’s less record of it, for one.
Two, a discount seems more like it's motivated by the seller’s generosity than a built-in part of the price.
So when they go away, a lot of buyers are discouraged from asking the sellers why.
Don't be that buyer.Imagine that one by one, the bulk discounts on concrete block are dropped by every seller in your area.
If discounts were a common practice in your industry, and they all suddenly disappear, it can be a sneaky way to fix prices without looking like it. , A market behaving abnormally isn't always the result of collusion, but collusion will always cause a market to behave abnormally.
Just because prices all spike at once doesn’t mean there’s price fixing at work.
There are plenty of legitimate market forces causing prices to spike.
In fact, the cause of a price spike could be virtually anything--a tornado in China, Brexit, a gas pipeline rupturing in Alabama.
Just be vigilant.
If something seems suspicious, take a closer look.For example, if the price of sugar or gasoline went up dramatically, it would make sense that the price of cola would also rise, as those are two crucial materials for the manufacture and distribution of cola became more expensive. , It’s not easy to get evidence proving price fixing without the subpoena power of a law enforcement agency.
However, if you suspect price fixing, a detailed record of transactions can go a long way toward initiating an investigation.
It provides the sort of probable cause that might warrant an investigation. -
Step 3: Pay attention to prices that move in tandem.
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Step 4: Ask sellers why discounts were phased out.
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Step 5: Determine the reason for a spike in prices.
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Step 6: Keep detailed procurement records.
Detailed Guide
If the seller is a large company with a national or global reach, you should even check for price differences within the company.
While price fixing is almost always practiced by large companies, it isn't always practiced by the entire company--a regional division might be colluding locally with other "competitors."For example, say the price of 8”x8”x16” concrete blocks averages $1.75 per block in your region, no matter which supplier you go to.
This seems high to you, so you call up a friend in another state, who tells you that he pays about $1.25.
When you look online, you see a range of prices, but nothing higher than $1.39 per block.
Since the same type of concrete blocks should cost about the same wherever you go, this might be a detail worth investigating
Just because prices aren’t exactly the same at every vendor doesn’t mean price fixing isn’t occurring.
In a perfect competitive market, each seller tries to gain advantages over the others.
That should mean the sellers' prices rise and fall at different rates as each one tries to sell for less or deliver more.
In a fixed market, the prices might rise and fall in tandem with one another, even if they aren’t exactly the same.
For instance, AAA Cola caters toward the higher end of the soda market.
They sell a bottle of AAA for $1.50.
C+ Cola focuses on the bottom end of the market.
They sell the same size bottle for $1.00.
One day you notice a bottle of AAA now costs $1.75.
When you go to pick up a bottle of C+ instead, you realize that it’s $1.25 per bottle.
You notice that sugar and gas are the same price as they’ve always been—why the sudden increase in the price of cola? It's tough to say, but it's worth investigating. , It’s much easier to eliminate a discount than it is to raise a price, even if they really amount to the same thing.
There’s less record of it, for one.
Two, a discount seems more like it's motivated by the seller’s generosity than a built-in part of the price.
So when they go away, a lot of buyers are discouraged from asking the sellers why.
Don't be that buyer.Imagine that one by one, the bulk discounts on concrete block are dropped by every seller in your area.
If discounts were a common practice in your industry, and they all suddenly disappear, it can be a sneaky way to fix prices without looking like it. , A market behaving abnormally isn't always the result of collusion, but collusion will always cause a market to behave abnormally.
Just because prices all spike at once doesn’t mean there’s price fixing at work.
There are plenty of legitimate market forces causing prices to spike.
In fact, the cause of a price spike could be virtually anything--a tornado in China, Brexit, a gas pipeline rupturing in Alabama.
Just be vigilant.
If something seems suspicious, take a closer look.For example, if the price of sugar or gasoline went up dramatically, it would make sense that the price of cola would also rise, as those are two crucial materials for the manufacture and distribution of cola became more expensive. , It’s not easy to get evidence proving price fixing without the subpoena power of a law enforcement agency.
However, if you suspect price fixing, a detailed record of transactions can go a long way toward initiating an investigation.
It provides the sort of probable cause that might warrant an investigation.
About the Author
Doris Richardson
Writer and educator with a focus on practical lifestyle knowledge.
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