Many times, business litigation occurs between parties who have direct working relationships with one another. A business has to hold a vendor accountable for delivering substandard materials. An employer might take legal action against a former employee who violated the terms of a restrictive covenant.
Occasionally, businesses need to take legal action not against the people or businesses they do business with but rather the businesses that they compete against on the local market. Competitors may violate antitrust laws and engage in unfair competitive practices. Price-fixing concerns could be a valid reason to pursue a lawsuit against one or more competitors operating in the same industry.
What constitutes price fixing?
The free market relies on businesses working independently to compete with one another. Competition drives companies to find ways to lower their operating costs and improve the goods or services that they provide to the public.
When one business has become too successful or when established businesses do not want to allow a new competitor to establish a presence on the local market, they may try to establish a scheme with others in the industry. Price fixing occurs when multiple businesses agree to set prices based not on market conditions but rather on the desire to prevent competition.
They may undercut the competition by pricing goods or services so low that other businesses in the same sector simply cannot compete. The goal is to squeeze the competitor out of the market, at which point the parties engaged in price fixing can adjust their pricing to better reflect operating costs.
Price fixing is illegal
Conspiring with other businesses to manipulate the market for financial gain is inappropriate at best and illegal in many cases. Companies that cannot compete because other businesses have engaged in price fixing and similar misconduct may have grounds to take legal action.
The process of proving that price fixing has occurred may require a thorough investigation. That being said, businesses and professionals can sometimes challenge the inappropriate practices of their competitors if they can prove that the goal is to undermine fair competition rather than to compete aggressively with another business. Initiating business litigation can potentially help organizations overcome the harmful impacts of unfair competition, including price fixing.