Bus 305 Unit 3 Db Market Structures and the Behavior of the Firm

BUS 305 Unit 3 DB

Market Structures and the Behavior of the Firm

In order for an organization to defend allegations of price fixing, it is important to understand that price fixing is an illegal arrangement under the antitrust laws of the United States that can result in fines, probation, and imprisonment. Information is provided for a recent case that has settled price fixing allegations with the Federal Trade Commission (FTC).

Information on Price Fixing

Under the antitrust laws of the United States, price fixing is an illegal process when firms make arrangements to conspire to fix prices (O’Sullivan, Sheffrin, & Perez, 2010 p602). The “Sherman Antitrust Act of 1890,” states that “price fixing is illegal” and it is also illegal to discuss strategies (conspire) to cause harm or eliminate competition when one firm under prices another and this can result in fines, probation, and even imprisonment (O’Sullivan, p608).

Recent Price Fixing Case

The Minnesota Rural Health Cooperative (MRHC), a group of 70 doctors and 25 hospitals has agreed to settle with the Federal Trade Commission (FTC) for increasing reimbursement health insurance rates. They eliminated competition by coordinating illegal price fixing agreements through contracted health insurance plans and refused to deal with other health plans or threatened to terminate health insurance contracts if they did not follow with their reimbursement rates (Federal, 2010).

The FTC issued illegal complaint charges under the antitrust laws of the United States for price fixing agreements to eliminate competition and coercion negotiations tactics with health insurers. The FTC only issues a complaint when there are grounds to believe that a law is or has been violated and may result in civil fines up to $16,000 (Federal, 2010).

Conclusion

Price fixing is illegal and decreases the competition, as in this case between other providers and health insurance companies, therefore limiting competitive...