How Price-Fixing is Enforced By Idia Aisien-Ogbebor

Price fixing

Can be defined as an agreement among competitors to elevate or fix their product prices. This agreement can occur among manufacturers, or competing sellers and buyers.

An example of international price fixing would be the Citric Acid case of 1996 by the four companies that came to be known as the G-4 or Lysine conspiracy, also in 1996, which involved countries like the United States and Japan agreeing to bump the price of Lysine up by 70 percent within the first couple of months. Lysine is a livestock feed used by farmers, and after a thorough investigation by the FBI five companies and six executives were held responsible and fined about $100 million.

It was the first time the Department of Justice had placed a greater fine than the Sherman Act Maximum of $10 million.

The Department of Justice Anti-Trust division has many guidelines on how it enforces laws prohibiting price fixing.

Price Fixing is an anti-trust conspiracy that constitutes felony violations of the federal law. This crime has harmful effects on the U.S. economy, as it fuels inflation, robs consumers, and undermines the system of free enterprise. Section 1 of the Sherman Act prohibits agreements among competitors that limits competitors where it says that any contract or conspiracy in restraint of trade or commerce is declared to be illegal. Price fixing is, therefore, a violation of section 1 and is criminally enforced by the Anti-Trust Division of the Department of Justice.

A Recent Case

On December 1, 2009 Nokia reportedly filed suits in both the U.K and United States claiming that many manufacturers of the LCD and CRT were involved in price fixing. Nokia had waited a long time to file the suits, because most screen manufacturers plead guilty to price fixing then settle or serve prison time in cases brought by the anti trust division.

Some of the companies Nokia sued include: Seiko Epson Corp.; Epson Imaging Devices Corp.; Epson Electronics America, Inc.; Hitachi, Ltd.; Hitachi Electronic Devices (USA), Inc.; LG Display Co., LTD; Philips Electronics North America Corp.; Samsung Electronics, Ltd.; Sharp Corp.; Sharp Electronics Corp.; Toshiba Corp.; Toshiba America Electronics Components, Inc.; Toshiba Mobile Display Co., Ltd.; and Toshiba America Information Systems, Inc. to name a few.

Enforcement

How does the division determine whether a business has acted in violation of the Sherman Act, which prohibits price fixing and all other forms of collusive agreements?

The DOJ says on it’s website that price fixing “can be established by direct evidence, such as the testimony of a participant, or by circumstantial evidence, such as suspicious bid patterns, travel and expense reports, telephone records, and business diary entries.”

Furthermore, it is important to note that “price-fixing and bid-rigging schemes are per se violations of the Sherman Act.” This essentially means that if price-fixing has been established, it cannot be justified in any way under law.

For example, violators can not argue or show evidence that the agreed-upon prices were reasonable; that the agreement was necessary in preventing ruinous competition that would lower their prices; or that the conspirators were just trying to make sure that each got a fair share of the market.

Suspicious Indicators:

The Anti-Trust Division lists three examples indicative of price-fixing.

  • Look for situations where competitors always announce their price increases at the same time for the same amount or have staggered price increases with some pattern, such as appearing to take turns going first.
  • Look for competitors reducing or eliminating discounts at about the same time.
  • Generally, be alert to situations in which all prices seem to be uniform and all suppliers refuse to negotiate those prices.

Cases of Precedent

The Anti-Trust Division was extremely active in enforcing federal laws against price-fixing, bid-rigging and all other forms of collusion in Louisiana after Hurricane Katrina left the coastal communities extremely vulnerable. The division created a Hurricane Katrina Fraud Task Force to ensure that the communities hardest hit were “not further victimized by those that seek to subvert competition and divert federal funds to their own pockets and away from the most needed rebuilding projects.”

The strict enforcemtent within Hurricane Katrina communities was preceded by cases of collusion and price-fixing after the 1997 typhoon hit Guam. After the United States awarded more than $70 million in aid for relief and rebuilding contracts, the DOJ Antitrust division ran an investigation and found many cases of collusion.

The most notable and infamous case was the U.S. v. Austin J. “Sonny” Shelton case filings.

Shelton was the director of Guam’s Department of Parks and Recreation and was responsible for awarding contracts for FEMA-funded construction projects. Shelton was convicted of 12 counts of criminal activity for orchestrating three separate bid-rigging conspiracies, soliciting and receiving more than $100,000 in bribes in return for the award of contracts, committing wire fraud, and conspiring to launder money.

One of the biggest areas that the Anti-trust division was able to enforce successfully in fy 2010 was Air Transportation.

See the screen-shot below from the DOJ Anti-trust division website.

— Caroline Pacl contributed to the previous sections on Enforcement and Cases of Precedent

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Comments
One Response to “How Price-Fixing is Enforced By Idia Aisien-Ogbebor”
  1. The wire has been cancelled and we now contain satellite.

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