For price fixing agreements to be considered illegal:
there must be a ‘contract, arrangement or understanding’ or a proposed ‘contract, arrangement or understanding’ (the agreement)
two or more of the parties to the agreement must be competitors
the agreement must have the purpose or effect of fixing, controlling or maintaining the price of goods or services, or be likely to do so
what is fixed must be the price for—or a discount, allowance, rebate or credit in relation to—goods or services.
Sometimes the selling or buying of competing businesses will be set at the same level so that the price fluctuations of one are matched by equivalent fluctuations by the others.
Although this may seem like collusive behaviour, legitimate commercial reasons may include:
highly visible prices displayed by competitors (e.g. petrol price boards) allowing competitors to quickly adjust their prices to match price movements
a single dominant firm that has lower costs than others; in order not to be undercut, the others match the price of the dominant firm with the dominant firm becoming a ‘price leader’ and the others ‘price followers’.
