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8/03/2012

What is price fixing?



Below is copied from the Competition Commission of Singapore’s website.

‘ A particularly serious type of anti-competitive agreement would be those made by cartels. Cartel agreements are usually to fix prices, to rig competitive tendering process, to divide up markets or to limit production. As a result, the cartelists have little or no incentive to lower prices or provide better quality goods or services. Based on economic studies, cartels overcharge by 30 per cent on average. There are four main types of cartel agreements:

• Price Fixing

Price fixing involves competitors agreeing to fix, control or maintain the prices of goods or services. It can be ‘direct’ fixing of prices, where there is an agreement to increase or maintain actual prices. Price fixing activities can also take the form of ‘indirect’ fixing of prices, for example, where competitors agree to offer the same discounts or credit terms. Price fixing agreements do not have to be in writing, a verbal understanding at, for instance a trade association meeting or at a social event, may be sufficient to show that there was a price fixing agreement. It does not matter how the agreement was reached or whether it has been carried out. What matters is that the competitors have agreed to collude.’

On 29 Jul 12, it was reported that 7 Town Councils announced that they would be revising Service and Conservancy Charges in their respective areas. My first impression is that here is a cartel of 7 Town Councils working together to fix prices at the same time. But then again, I think these Town Councils would know what price fixing is all about and knowing the law, they would be well advised not to violate it. Further, they are not commercial enterprises but govt or semi govt agencies and price fixing offence may not be applicable even if they did have some agreements to raise their fees together with or without any intention to fix prices.

As a layman, I would be hard pressed to try to interpret and understand what is price fixing by a cartel and whether in this instance there is any, or whether the Town Councils are guilty of price fixing. I have no reason to doubt the integrity of these govt officials and would believe that they have done the correct and proper thing and there is thus no price fixing.

7 comments:

Anonymous said...

When one oil company raised the price by 5 cents, the rest of oil companies quickly follow suit and by the same amount. Is this price fixing? Or just grey?

Anonymous said...

Ha! Ha!
Good one redbean.

I prefer to have Opposition-run Town Councils to use as a benchmark for best practices.

Anonymous said...

The fruits in Opposition run Town Councils are all big, fresh and cheap cheap. Whats more, they are all grown by true blue loyal Singaporeans. That's why everyday I drive there to buy a load.

Eagle's 2nd Eye said...

If that is true, you can actually do a price arbitrage. Redbean can teach you how to do it. And you will soon be rich.

Anonymous said...

What cartel and price fixing?

One state enterprise that supplies
every essential goods and services
and all prices will be standardized
to a fair price.

Anonymous said...

Elites can do no wrong. Just like the two Woffles' speeding tickets where no driver will be caught when the non elite Kwan had paid the fines.

Those hauled up for price fixing are at best quasi or pseudo elites.

Anonymous said...

Cartel and price fixing are less evil than monopoly.