Competing businesses must not agree to fix, control or maintain the price (or any component of the price, e.g. discounts) they will charge for goods or services.
Two companies with considerable market share in the cardboard carton market conspired to raise the prices of their products whilst maintaining their respective market shares. Executives from both companies met secretly in public places and also communicated via public phones to consult on price rises and colluded when negotiating quotes with customers. This amounted to price fixing and the business and individuals involved were fined an amount exceeding $133 million.
Industry associations – recommended prices
Industry associations bring together individual businesses within an industry to form a body that represents and acts in the collective interests of its members.
Industry associations need to be careful when dealing with pricing issues, including recommended price lists or fee schedules. When an industry association recommends prices for its members, this could have the effect of price fixing by creating a minimum price that all the competing businesses sell their goods or services at.
While industry associations may wish to help their members, particularly new and inexperienced operators, on the issue of pricing, it needs to be clear that businesses are free to set their own prices.
The definition of price fixing under Australian law includes a range of behaviour that extends beyond clear agreements to charge at or above a particular price for goods or services. It also includes agreements between competitors that fix, maintain or control discounts, allowances, rebates or credits in relation to goods or services acquired or supplied.
The price fixing law also catches businesses that make agreements containing provisions that have the purpose, effect or likely effect of controlling a component of the end price that will be charged by cartel members.
Four major construction companies agree that the company that wins a particular tender will pay each unsuccessful tenderer an 'unsuccessful tenderer fee' of $500 000.
Even though each tenderer retains considerable discretion as to the terms on which they would tender, this agreement amounts to price fixing because each tenderer would factor the 'unsuccessful tenderer fee' into their tender price.