Countries generally have laws restricting competitors from colluding together to decide on a common price minimum. These laws are not always easy or possible to enforce.
Apart from bidding, companies are generally aware what their competition charges. Many of these rates are also publicly available.
In the Internet age, matching rates is easier, and with algorithms it is probably easy to achieve digitally what may be illegal by collusion. If not, AI and further advances will make it more so.
But my understanding is that using these digital mechanisms to inflate prices is not illegal. Is this so? Should it be? If so, how could you possibly enforce it? Are there any serious efforts underway to investigate, track or deal with this potential issue?
Knowing what competitors charge and adjusting your price in response has always been a thing, and is perfectly normal and acceptable. The key is that, at any given moment, any given vendor can always say “I’m not making enough margin on this item” or “My location is more convenient than the others, so folks will be willing to pay more”, or whatever, and charge more than their competitors, or “I want to get more people to come to my store”, or whatever, and charge less. It’s only a problem if everyone decides “I’m going to charge the exact same amount as my competitors”, and in the real world, that only works with active collusion: Without the active collusion, there’s always going to be someone who bucks the trend one way or the other.
It’s real, and a problem, and almost certainly illegal. The FTC has a page on the topic:
Lawsuits have been filed against RealPage, which is software that does exactly what you describe for apartment prices:
I don’t think any lawsuits have finished yet, so we’ll see how it goes. The software company presumably thought they were giving their users some plausible deniability since they were just following the software recommended prices. Of course, the software knows all the prices in the area and can keep them artificially high, and so this is in effect a kind of collusion.
There’s nothing illegal with being a price leader or a price follower.
Illegal happens when two or more concoct a scheme together to keep their prices close to in sync, to avoid the “race to the bottom” that a price war leads to. Often this leads to prices higher than if there were competition.
The article about Arizona is interesting. Depending on how you look at it, basically multiple landlords subscribe to a service that tells them what to charge - so a central figure (the RealPage) is telling (“suggesting”) multiple independent landlords what to charge, rather than letting them come up with their own prices. Or rather, it’s telling them how high they can get way with. Price fixing by letting a separate third party call the shots is probably still price-fixing. After all, with hundered of landlords, it’s not like rent levels are widely advertised, or there is one big competitor with prices widely advertised that others independently decide to set their prices based on.
What stops a price war is when it hits the point where the others stop matching, saying “ha ha, he can’t cover his costs at that price. We’ll let him take the bath for a while and he’ll smarten up.” It’s cheaper for the competitors to lose sales than to match the price.
The guy with the next stall knocks a few cents off the price of his eggs, so you either have to follow or find some way to persuade customers that your eggs are better.
If all the egg sellers get together and agree the price in advance, that’s price fixing.
In some countries, it’s the government who sets the price of eggs (and staples like milk, bread, etc.) in advance. It’s still not the egg sellers, excluding corruption.
Canada has /had a number of “marketing boards” that regulate the price of certain commodities - eggs and milk come to mind. The milk marketing board is a sore spot for American milk producers, - it sets the price of milk in Canada; what logically follows is, with a price that can help smaller farms stay in business, the problem becomes overproduction, so it also hands out license quotas -who can produce how much milk. The NAFTA negotiations and Trump’s follow-up spent a lot of hot air on how much of the milk productsmarket the American producers could have… the contention being that an open market would mean the USA could simply flood our market with their surplus and put every dairy farmer in Canada out of business (and then in slow times, Canada would be the last to get milk and suffer most from production shortages). Protecting the family farms is a priority in both countries.
The Egg Marketing Board hit an interesting peak in the 80’s when it came out that they’d been buying more eggs from producers than they could sell, and so had accumulated vast warehouses full of proverbial rotten eggs. The EU at the time was also notorious for lakes of wine and similar large warehoused surpluses that they often had to destroy to keep European farmers in the black.
Monkeying with the market only works for a while. Someone pays the price. But governments can do centrally what is illegal for entrepreneurs to collude to do.
(There was a Law & Order episode where someone was smuggling cheese into Canada, and was murdered by someone who thought they were smuggling large quantities of drugs…)