The European Commission recently fined Nintendo nearly $150 million after it was determined that the video game company had colluded with European distributors to fix prices
Why is price fixing not considered a good practice? What are different kinds of price fixings?
The reason why Nintendo had to pay a fine was due to price fixing which, in most instances, is considered illegal. It is illegal for representatives of two or more companies to secretly set similar prices for their products. This practice is known as "price fixing." It is considered an undesirable practice since it is an anticompetitive act. Companies that collude in this manner are generally trying to ensure higher prices for their products than would generally be available if markets were functioning freely. There are two major types of price fixings. One of them is described as horizontal price fixing in which competitors within an industry that make and market the same product conspire to keep prices high. For example, if airlines collude and decide to have higher prices that would be referred to as horizontal price fixing. The next type is called the vertical price fixing, which occurs when a manufacturer conspires with wholesalers or retailers to ensure certain higher retail prices are maintained. In the case of Nintendo, it was vertical price fixing since the video game company had colluded with European distributors to fix prices.
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