How exactly does price fixing work?

Thnx mikeh, that cleared up a whole lot for me.

It’s basically reverse capitalism. Instead of competing companies keeping their prices competitive as possible to attract more customers, they raise prices to make as much money as possible, but everyone does it at the same time.

One simple example would be two gas stations across the street from each other. One owner approaches the other and says, ‘’Ya know, instead of only making 2 cents on each gallon selling at $3.02, if we both agreed to raise our price to $3.04, we’d make twice as much.” Done and done. The customers are stuck unless they drive across town to another station, and the owners rake in the dough. On PAPER, nothing is being done that’s illegal. All anyone on the outside can see is two gas stations selling gasoline at the same price. They can only be prosecuted if hard evidence comes to light exposing the deal, which is extremely difficult to obtain. You pretty much have to get someone saying, ‘’Yep, we sure did fix those prices.’’

Bonus info: I don’t know if you ever listen to This American Life (an NPR show that specializes in telling compelling real-life stories, among other things), but they did a great episode on price fixing called The Fix Is In…

http://www.thisamericanlife.org/radio-archives/episode/168/The-Fix-Is-In

…which told the story of one of the largest price-fixing schemes in history and the whistleblower that brought it all down. The story of the guy on the inside who exposed it was told in the Matt Damon movie ‘’The Informant!’’ but frankly, I think This American Life did it much better :) I think you’ll enjoy the way the tale unfolds if you give it a listen.

My own interpretation of price fixing would be, let say, you have one petrol station (Americans calls it the Gas station) down the street and the other petrol stations further down the streets, all decide to get together (via phone or meeting) and reach an arrangement to jack up the price for their petrol, eg: 10 cents or more on a particular day, Monday or Friday afternoon.

It’s illegal in Australia but some companies do it discretely….They all put the prices of their fuel up and the poor consumers are left with no choice to but fill the tanks at that ‘fixed priced’.

The only other options are for the consumers to drive to the other end of town, and purchase their fuel at a lower cost, but this means driving further away…This concept works with supermarkets etc and this practice is illegal in Australia but they all do it.