Cornering the Market: The Crime of Price Fixing (15 U.S.C. Section 1)
Competition is part of the foundation of our economy, which is why Congress passed the Sherman Antitrust Act in 1890. The law was designed to prevent collusion between competitors and break up business monopolies that controlled the market. To this day, it is illegal to create any type of conspiracy between parties on the same side of the market, such as buyers or sellers, that set the price for their mutual benefit.
How Price Fixing Violates the Law
Section 1 of the Sherman Act states that “[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal.”1
Essentially, this language covers any kind of agreement between businesses that controls the market price or the supply and demand of any item. If a business agrees to prevent other businesses from being able to compete in the open market, it in turn stops the public from reaping the benefits of free competition.
These agreements can cover a wide range of pricing topics, including:
- Present or future prices
- Pricing policies
- Promotions
- Bids
- Costs
- Capacity
- Terms or conditions of sale, including credit terms
- Discounts
- Identity of customers
- Allocation of customers or sales areas
- Production quotas
- Research & development plans2
It is important to know that a business may use legitimate efforts to obtain the best price they can. A business is allowed to raise its prices or control its supply, even if it does not benefit the public. Similarly, just because two businesses set the same price for a similar product does not mean they are guilty of price fixing. The important factor is that there must be an agreement to do so, either express or implied.
Examples of Price Fixing
Many price fixing cases involve large companies attempting to drive up prices by controlling the supply of essential components of products. In 2002, Elpida Memory, a large Japanese manufacturer of DRAM chips, pleaded guilty for its participation in a global conspiracy to fix prices. The company made an agreement with four other DRAM manufacturers to fix prices of DRAM chips sold to certain computer and server manufacturers, including Dell, Compaq, HP, Apple, IBM, and Gateway.3
Apple has been both a victim and a perpetrator of this crime. In 2013, Apple was found to have violated the Sherman Act by agreeing with five publishers of e-books to fix the prices of digital books. The target of this agreement was to put an end to Amazon’s stranglehold on the e-book market.4
Penalties for the Crime of Price Fixing (15 U.S.C. Section 1)
The punishment for violating the Sherman Antitrust Act is severe. For corporations, the fines can reach up to $100 million. If the crime is committed by a person, he or she can be ordered to pay as much as $1 million and sentenced for up to 10 years in federal prison.
Contact the Federal Attorneys at Wallin & Klarich to Begin Your Defense
If you or your company has been accused of violating antitrust laws, contact one of our experienced federal defense attorneys as soon as possible. At Wallin & Klarich, our attorneys have worked for over 40 years with people accused of illegal business practices, and we are committed to giving you the best defense possible. Our attorneys are available to answer any of your questions.
With offices in Los Angeles, Sherman Oaks, Torrance, Tustin, San Diego, Riverside, San Bernardino, Ventura, West Covina and Victorville, there is a Wallin & Klarich attorney experienced in federal crimes near you no matter where you work or live.
Call us today at (877) 4-NO-JAIL or (877) 466-5245 for a free phone consultation. We will be there when you call.
1. [15 USC § 1, found at http://www.law.cornell.edu/uscode/text/15/1.]↩
2. [http://www.ftc.gov/tips-advice/competition-guidance/guide-antitrust-laws/dealings-competitors/price-fixing]↩
3. [http://www.seegerweiss.com/news/pricing-fixing/]↩
4. [http://www.publishersweekly.com/pw/by-topic/digital/content-and-e-books/article/58166-apple-loses-judge-finds-price-fixing-in-e-book-case.html]↩
