Price Fixing

• Author: Patricia Spirou
• Pages: 597-598

Page 597

Price fixing is a conspiracy to artificially set prices for goods or services above or below the normal market rate. The U.S. Justice Department and the Federal Trade Commission (FTC) are the regulatory bodies responsible for determining whether companies are involved in price-fixing tactics. Both bodies have the ability to impose heavy fines on those companies found to be conspiring to fix prices.

The health-care industry has been scrutinized many times for price fixing, especially companies that manufacture vitamins. In 1995 the Justice Department fined three vitamin manufacturers a total of $750 million dollars for conspiring to fix vitamin prices. In addition, three vitamin distributors were also found guilty of price fixing that same year; their fines totaled $137 million for fixing the prices for a handful of popular vitamins, and they had to pay just over $1 billion to 1,000 corporate buyers of bulk vitamins, an amount reflecting overcharges during the years of the conspiracy.

Roche Holdings AG, which held 40 percent of the global vitamins market, agreed to pay a fine of $500 million and as of 1999 was the object of class-action lawsuits and investigation by the European Commission. Because of the various price-fixing scandals, Roche and other vitamin manufacturers could experience trouble when raising prices, or even stabilizing them. The price-fixing conspiracy lasted from 1990 through 1999 and affected vitamins A, B2, B5, C, E, and beta carotene. It also included vitamin premixes, which are added to breakfast cereals and other processed foods. The Justice Department's probe of price fixing continued as the government attempted to build cases against other vitamin manufacturers.

In 1996 the FTC and the Justice Department issued a revised Statement of Antitrust Enforcement Policy in Health Care. Under this new enforcement policy, the FTC and the Justice Department do not necessarily view joint agreements on price between previously competing providers as unlawful price fixing if the integrated delivery system is sufficiently integrated. The enforcement statement does not, however, provide solid guidance on what constitutes integration sufficient to permit joint negotiations. But, it does offer rules of thumb that will allow those involved in integrated delivery systems to better assess whether their joint pricing activities will raise antitrust concerns.

The securities industry was also closely...