Any agreement between competitors that sets the price of goods or services or interferes with how that price is reached is illegal under the Commerce Act.
Price fixing harms competition, with members of a cartel likely to make more profit than they would if they competed fairly. This means that goods and services become more expensive, consumers end up with fewer choices, and quality or service levels are likely to deteriorate.
When is an agreement price fixing?
Price fixing includes agreements between competitors to charge customers a specific price for goods or services. However, it can also include agreements that ultimately affect the price a customer pays for goods or services.
Price fixing agreements are also sometimes referred to as cartels. A cartel is formed when businesses agree to act together for an anti-competitive purpose instead of genuinely competing against each other.
Cartel conduct, including price fixing, is illegal under the Commerce Act. Other types of cartel conduct include competitors agreeing to rig bids, agreeing to divide markets by customer or geographic area, or agreeing to restrict output.
Watch our animated videos below to learn more about price fixing, dividing up and sharing markets, and bid rigging and discussing tenders.
Read our quick guide on competing fairly in business.
Tips for businesses when engaging with competitors
Make sure that you and your staff are familiar with the requirements of the Commerce Act and seek and keep records of who has attended training
Seek independent legal advice to ensure your business is not at risk of breaching the Commerce Act
Think carefully about who you are, or may be, in competition with, especially if sub-contracting is involved
Do not agree prices, discounts or any matters relating to price with your competitors (unless it is a specific sub-contract you are discussing)
Do not exchange pricing information with your competitors
If you are approached by another business to discuss pricing, allocating customers, bids for contracts or restricting outputs you should raise an objection straight away. Leave the discussion immediately
Review internal documents, policies and procedures for compliance with the Commerce Act
The Commerce Act prohibits cartel conduct. Cartel conduct includes any contract, arrangement or understanding (agreement) between parties who are in competition with each other that has the purpose, effect, or likely effect of:
fixing, controlling or maintaining the price of goods or services (price fixing)
restricting output, capacity, or the supply of goods or services (output restriction)
allocating customers or geographic markets (market allocating)
The Act also prohibits any agreement which substantially lessens competition in a market, which includes a broader type of conduct than the cartel conduct listed above.