Price fixing: economic harms and justifications

Philosophy and Price Fixing

Price fixing is an agreement between participants on the same side in a market to buy or sell a product, service, or commodity at a fixed price, or maintain the market conditions such that the price is maintained at a given level by controlling supply and demand (Bork, 1966, p.377). Such an agreement benefits only the businesses or individuals that abide by it, and the concept itself is viewed as a conspiracy between bodies that is deemed illegal in many countries around the world. With such distaste for the concept of price fixing, comes the question of ethical backlash from the outlying community. Is price fixing good or bad? The question at hand can be answered in viewing research, philosophical theory, and public opinion, all of which overwhelmingly assert that price fixing is not only bad business, but bad general ethical behavior as well.

Price Fixing in the Business World

In viewing business ethics, price fixing is a concept that consistently rises to the top of the pile in terms of problems that must be addressed before escalating into lengthy and complicated legal battles. Despite the general consensus that price fixing is not only detrimental to business, but illegal in many countries, businesses continue to act under the radar fixing prices in order to combat the competitors in the market and ultimately turn a profit for themselves. With such a reality at hand, the question remains, why do companies continue to act in a manner that not only violates business ethics, but mandated legislation as well?

In looking at what businesses seek to gain from such practices, the answer appears simple: money. Companies as notable as Pepsi, Samsung and British Airways have been fined tremendous amounts of money for being found guilty of price fixing, and in assessing the amounts of money that such companies have at their fingertips, one can only begin to process the sense of greed that can overtake such companies in seeing competitors begin to edge them out in the market.

In the end, price fixing comes down to little more than the aforementioned greed of individuals within a company, which may not represent the beliefs of a company as a whole, but can destroy them as such in an instant. Authors Jess Sonnenfield and Paul Lawrence (1978), note that despite good intentions, executives often find it difficult to carry through on good intentions, especially in back-room dealings. They cite a recently-indicted executive who noted, "when individuals are questioned, they have the gall to say they 'were only looking out for the best interests of the company,' . . . they seem to think that the company message is for everyone but them" (Lawrence and Sonnenfield, 1978, p.1). As seen, despite the business ethics drilled into many executives and business employees in their time in school, many while earning their MBAs, ethics tend to waver in the face of large amounts of money, which can prove a temptation too hard to turn down.

Price Fixing and Philosophy

In looking at price fixing in terms of philosophy, one can apply many ethical theories in order to understand the motives of such individuals who employ it as well as help individuals understand why the practice itself is an unethical one. In beginning a philosophical assessment, one can first look at several consequentialist theories, which employ a general cost-benefit analysis to one's actions.

University of Tennessee professor James Fieser (2010) notes that consequentialism states that an action is morally right if the consequences of that action are more favorable than unfavorable, and this applies directly to executives who believe that should they engage in price fixing and get away with it, the consequences will bring in significant profits for a company and therefore will benefit the company collectively as well as themselves (Feisher, 2009, p.1). In viewing this in such a manner, one can more directly see the internal thoughts of executives who are looking for a way to internally justify their actions before employing them.