Antitrust and Price Fixing

The Fundamental Prohibition

Price fixing—agreements among competitors to set prices—is per se illegal in the United States under Section 1 of the Sherman Act. 'Per se illegal' means these practices are illegal in and of themselves, regardless of intent or effect. Prosecutors don't need to prove that the agreement harmed competition or consumers—the agreement itself is the crime.

Price fixing violations can result in criminal prosecution with prison sentences for individuals, massive fines for companies (often hundreds of millions of dollars), and follow-on civil lawsuits seeking treble damages. These aren't hypothetical risks—price fixing prosecutions occur regularly and penalties are severe.

What Constitutes Price Fixing

Price fixing includes any agreement with competitors about:

Setting prices or price levels ('Let's all charge at least $X')
Price changes ('Let's all increase prices 10% next month')
Discount policies ('Let's all eliminate volume discounts')
Credit terms ('Let's all require payment within 30 days')
Bid coordination ('You bid on this one; I'll bid on that one')
Market allocation ('You take the east; I'll take the west') The agreement need not be formal or written. A handshake, a nod, or even parallel pricing behavior following a meeting can be enough. Courts infer illegal agreements from circumstantial evidence—'conscious parallelism' where competitors change prices in lockstep following opportunities to communicate.

Case Study: The Lysine Cartel: Price Fixing Consequences In the 1990s, executives from major lysine producers (Archer Daniels Midland, Ajinomoto, Kyowa Hakko) met regularly at hotels and trade shows to coordinate pricing. They agreed to fix prices, allocate market shares, and suppress competition. When the conspiracy was uncovered through an FBI investigation: Three ADM executives received prison sentences (2-3 years each). ADM paid $100 million in criminal fines—the largest at the time. Total civil settlements exceeded $400 million. The case inspired the movie 'The Informant!' starring Matt Damon. Most damaging: the reputational destruction and executive careers ended. The lesson: price fixing isn't a pricing strategy; it's a crime with career-ending and company-destroying consequences.

Safe Practices to Avoid Antitrust Risk

Never Discuss Prices with Competitors

This is the cardinal rule. Don't discuss current prices, future prices, pricing strategies, discounts, or anything related to pricing with competitors. Period. Not at conferences. Not at trade association meetings. Not at social gatherings. Not 'just curious.' Not 'off the record.'

Be Careful at Trade Associations

Trade association meetings are common venues for price fixing conspiracies because competitors gather regularly. If pricing comes up at a trade association meeting—even in passing—immediately object, leave the room, and document your departure. Have your attorney review any trade association activities involving information exchange.

Independent Pricing Decisions

Each company must make pricing decisions independently, based on its own costs, strategies, and market analysis. You may monitor competitor prices—that's legal and smart. But your pricing must be your decision, not coordinated with competitors.

Document Your Process

Maintain documentation showing that pricing decisions are based on legitimate business factors (costs, demand, strategy) rather than agreements with competitors. Good documentation won't prevent prosecution if you've actually colluded, but it provides defense if you're wrongly suspected.

Information Exchanges

Sharing pricing information with competitors is risky even if there's no explicit agreement to fix prices. Courts view information exchanges as facilitating coordination. Be especially cautious about:

Advance announcements of price increases that could signal competitors
Sharing detailed pricing data through third parties
Benchmarking studies that reveal individual company pricing
Discussions about 'fair' or 'appropriate' industry pricing

Key Takeaways

Price fixing is per se illegal—no proof of harm needed, the agreement itself is criminal
Never discuss prices with competitors under any circumstances
Trade association meetings are high-risk environments—be vigilant
Document that pricing decisions are independent and based on legitimate factors

Antitrust and Price Fixing

The Fundamental Prohibition

What Constitutes Price Fixing

Price fixing includes any agreement with competitors about:

Setting prices or price levels ('Let's all charge at least $X')

Price changes ('Let's all increase prices 10% next month')

Discount policies ('Let's all eliminate volume discounts')

Credit terms ('Let's all require payment within 30 days')

Bid coordination ('You bid on this one; I'll bid on that one')

Market allocation ('You take the east; I'll take the west') The agreement need not be formal or written. A handshake, a nod, or even parallel pricing behavior following a meeting can be enough. Courts infer illegal agreements from circumstantial evidence—'conscious parallelism' where competitors change prices in lockstep following opportunities to communicate.

Case Study: The Lysine Cartel: Price Fixing Consequences In the 1990s, executives from major lysine producers (Archer Daniels Midland, Ajinomoto, Kyowa Hakko) met regularly at hotels and trade shows to coordinate pricing. They agreed to fix prices, allocate market shares, and suppress competition. When the conspiracy was uncovered through an FBI investigation: Three ADM executives received prison sentences (2-3 years each). ADM paid $100 million in criminal fines—the largest at the time. Total civil settlements exceeded $400 million. The case inspired the movie 'The Informant!' starring Matt Damon. Most damaging: the reputational destruction and executive careers ended. The lesson: price fixing isn't a pricing strategy; it's a crime with career-ending and company-destroying consequences.

Safe Practices to Avoid Antitrust Risk

Be Careful at Trade Associations

Information Exchanges

Advance announcements of price increases that could signal competitors

Sharing detailed pricing data through third parties

Benchmarking studies that reveal individual company pricing

Discussions about 'fair' or 'appropriate' industry pricing

Key Takeaways

Price fixing is per se illegal—no proof of harm needed, the agreement itself is criminal

Never discuss prices with competitors under any circumstances

Trade association meetings are high-risk environments—be vigilant

Document that pricing decisions are independent and based on legitimate factors