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Price Fixing

tain policies. This allows it to take precautionary steps, The health-care industry has been scrutinized many
revising its statements to avoid problems that others have times for price fixing, especially companies that manufac-
encountered. Of course, keeping up with new laws or ture vitamins. In 1995 the Justice Department fined three
interpretations is critical. For example, laws have been vitamin manufacturers a total of $750 million dollars for
passed regarding e-mail privacy, and courts have ruled in conspiring to fix vitamin prices. In addition, three vitamin
various ways on the rights of the employer or employee in distributors were also found guilty of price fixing that
regard to this issue. Undoubtedly, the courts will be hear- same year; their fines totaled $137 million for fixing the
ing and interpreting more cases on e-mail privacy. Keep- prices for a handful of popular vitamins, and they had to
ing up with current events with an eye to how they might pay just over $1 billion to 1,000 corporate buyers of bulk
impact a company’s policy statements is a good idea. vitamins, an amount reflecting overcharges during the
years of the conspiracy.
SUMMARY Roche Holdings AG, which held 40 percent of the
global vitamins market, agreed to pay a fine of $500 mil-
Policies are created to help business run more smoothly. lion and as of 1999 was the object of class-action lawsuits
Knowing how to develop complete and accurate state-
and investigation by the European Commission. Because
ments for a specific audience will help organizations suc-
ceed in having up-to-date policies that work effectively for of the various price-fixing scandals, Roche and other vita-
min manufacturers could experience trouble when raising
them.
prices, or even stabilizing them. The price-fixing conspir-
SEE ALSO Management acy lasted from 1990 through 1999 and affected vitamins
A, B2, B5, C, E, and beta carotene. It also included vita-
min premixes, which are added to breakfast cereals and
BIBLIOGRAPHY
Campbell, Nancy (1998). Writing Effective Policies and Proce- other processed foods. The Justice Department’s probe of
dures: A Step-By-Step Resource for Clear Communication. New price fixing continued as the government attempted to
York: American Management Association. build cases against other vitamin manufacturers.
Kuiper, Shirley (2005). Writing Policies, Procedures, and In 1996 the FTC and the Justice Department issued
Instructions. Contemporary Business Report Writing (3rd ed.). a revised Statement of Antitrust Enforcement Policy in
Mason, OH: Thomson South-Western. Health Care. Under this new enforcement policy, the
FTC and the Justice Department do not necessarily view
joint agreements on price between previously competing
Marie E. Flatley
providers as unlawful price fixing if the integrated delivery
system is sufficiently integrated. The enforcement state-
ment does not, however, provide solid guidance on what
POWER constitutes integration sufficient to permit joint negotia-
tions. But, it does offer rules of thumb that will allow
SEE Division of Labor; Management: Authority and
those involved in integrated delivery systems to better
Responsibility; Management/Leadership Styles
assess whether their joint pricing activities will raise
antitrust concerns.
The securities industry was also closely scrutinized in
the 1990s for price-fixing tactics. Investigations of the
PRESTIGE PRICING
National Association of Securities Dealers and the NAS-
SEE Pricing DAQ market by the Department of Justice and the Secu-
rities and Exchange Commission during the latter part of
the 1990s suggested that market makers colluded to fix
prices and widen bid-ask spreads in attempts to increase
PRICE FIXING dealers’ profits at the expense of investors. At a minimum,
Price fixing is a conspiracy to artificially set prices for market makers appeared to have adopted a quoting con-
goods or services above or below the normal market rate. vention that could be viewed as anticompetitive behavior.
The U.S. Justice Department and the Federal Trade Com- In understanding the experience of the U.S. securities
mission (FTC) are the regulatory bodies responsible for market, it is important to consider what sorts of behavior
determining whether companies are involved in price- are deemed anticompetitive. U.S. law on overt price fixing
fixing tactics. Both bodies have the ability to impose is clear: such behavior is illegal. In many cases, however,
heavy fines on those companies found to be conspiring to there is no explicit agreement to fix prices. Based on the
fix prices. Sherman Antitrust Act of 1890, U.S. courts developed the

ENCYCLOPEDIA OF BUSINESS AND FINANCE, SECOND EDITION 597