Price fixing is defined by businessdictionary.com as…
“Agreement among competitors to (1) sell a good or commodity at the same price, (2) use the same formulas for computing selling prices, (3) offer the same discounts, (4) keep the same price differentials between different order quantities, qualities, or types, and (5) not lower the prices without notifying other competitors.”
Price fixing deprives the consumer of freedom of choice when searching for the best prices on goods and services. It was typically considered a criminal offense until 2007. A Supreme Court ruling two years ago allowed for some lose interpretation of price fixing by blurring the lines. The nations highest court, in 5-4 decision in June of 2007, ruled it was ,”no longer automatically unlawful for manufacturers and distributors to agree on setting minimum retail prices,” according to a New York Times report on the ruling. This ruling in some ways opened the door for price fixing.
As with any Supreme Court decision, this ruling set a precedent that threatened to change the 96 year old ban on price floors. From a consumer standpoint, it seems like price fixing puts them at a disadvantage. From an entrepreneurship standpoint, agreements between manufacturers and retailers could possibly be beneficial. This would allow an entrepreneur to get an equal return across the board on their product/service.
This was the logic behind the Supreme Court ruling. New products that come to market are a risk for retailers, but if the retailers have an agreement on a desired price for a new product, they will be more willing to sell it. In this manner, competition is encouraged because new entrepreneurs are given a chance to compete for spots in retail stores with out the store bearing the burden for the investment. This burden is handed to the consumer.
There is a new Maryland law that will take effect on October that seeks to indirectly challenge the ruling of the Supreme Court from two years ago. The Maryland law “will make it illegal for any manufacturer to tell any retailer what price to charge a customer,” according to ClarkHoward.com. Other states are sure to follow and challenge the Supreme Court decision as well.
It is going to be interesting to see how the Maryland law effects price fixing nation wide.
