Legal Definitions - horizontal price-fixing

Horizontal price-fixing occurs when competing businesses that operate at the same level within a market agree to set, control, or manipulate the prices of their goods or services. This illegal practice eliminates competition among them, leading to consumers paying higher prices than they would in a truly competitive market. It is a serious violation of antitrust laws, as it undermines the fundamental principle of fair competition.

Here are some examples:

• Imagine three major companies that manufacture and sell a popular brand of athletic shoes. Instead of competing to offer the best prices to retailers or directly to consumers, their CEOs secretly meet and agree that they will all raise the wholesale price of their top-selling running shoe by 15% starting next quarter. This agreement ensures that no single company gains a competitive advantage through lower prices, and all three benefit from increased revenue at the expense of retailers and ultimately, consumers.

  This illustrates horizontal price-fixing because the three companies are direct competitors at the same level of the market (shoe manufacturers). Their agreement to collectively raise prices eliminates price competition among them.

• In a small town, there are four independent auto repair shops. The owners of these shops regularly meet for coffee. During one of these meetings, they decide that to increase their profits, they will all charge a minimum of $100 per hour for labor, regardless of the complexity of the repair. They also agree not to offer any discounts that would bring the effective hourly rate below this threshold.

  Here, the four auto repair shops are competitors providing the same service in the same local market. Their agreement to set a minimum hourly labor rate constitutes horizontal price-fixing, as it removes price competition for auto repair services.

• Consider several large online bookstores that sell newly released hardcover novels. Instead of letting market forces dictate prices, the pricing managers from these companies communicate through an encrypted messaging app. They agree to list a highly anticipated new novel at a uniform price of $28.99 for the first month after its release, and not to offer any promotional discounts below that price during that period.

  This scenario involves multiple online bookstores, which are direct competitors at the retail level. Their coordinated agreement to maintain a specific price for a new book, rather than competing on price, is an instance of horizontal price-fixing.