Collusion among firms or services could be considered an illegal activity if meant to gain the upper hand while eliminating competition.
When colluding, one gains an “unfair advantage over a third party, competitors, consumers or others with whom they are negotiating,” according to the USLegal website.
Price fixing among people of services who provide the same service or product limits the competitive factor and sets, more often than not, a price that is way above a fair price.
In the United States, price fixing may be considered a criminal federal offense under Section 1 of the Sherman Antitrust Act. Prosecution is generally carried out by the U.S. Department of Justice, the Federal Trade Commission, or a state’s attorney general.
Labor Unions and Price Fixing
The Sherman Antitrust Act, according to a number of opinions written by law scholars, does not give guidance in the strictest sense when it comes to antitrust lawsuits. However, it is meant to uphold competition, “designed to promote economic efficiency, consumer welfare, and a system of diffused power,” according to an opinion by Bernard D. Meltzer from the University of Chicago Law School as far back as 1963.
Generally, articles that address unions being involved in price setting ask the question if antitrust action can be used against price fixing in the plumbing industry. But that is as far as it goes. No antitrust action has been found that would ease the burden on consumers hiring plumbing services.
“Hiring a plumber is a nightmare. First you are charged for the estimate. Then the plumber finds all kinds of problems that suddenly need fixing and provides a large estimate that makes your hair stand up in shock,” said Mel, a frustrated customer who looked for a plumber to fix a 30-year-old plumbing system that connected the pipes to the outside system, which in the plumber’s own words, would take less than two hours.
He continued to explain that he agreed for the plumber to come and fix the problem, but did not tell him until he arrived that he only wanted the piping system connecting the outside source with the inside of the house fixed. The price went from $375 to $750 for the two-hour job.
The gist of the story is that the plumber said he would give a discount on everything that entailed the whole job, but would charge the full price if only one part is done. He opened a book and showed him the quoted price and said that this is an agreed upon price that all plumbers charge, that is, a set price. Mel sent the plumber on his way and told him that he wouldn’t pay him $750 for a two-hour job. Every other plumber quoted the same amount.
Although in the end he found a plumber who repaired the problem for a minimal charge, not every one has the time or ability to find someone who charges a fair price.
Original Intent of a Union
“Unions are bargaining agents for groups of workers. Unions typically make contracts with individual employers or employer groups that set common wage rates and working conditions for those employers’ covered workers,” according to an article on the eHow website.
Therefore, unions were granted an exemption under the Clayton Antitrust Act. Exempted were union activities such as picketing and boycotts. The legitimacy of price fixing by plumbers, electricians, and other service-oriented labor unions came from that exemption.
So far, no courts have addressed the legitimacy of price fixing, fairness, and elimination of true competitive forces among the abovementioned services by applying the Sherman Antitrust Act.
No precedence has been set, and according to discussions on the Internet, the general public is still facing fixed prices that are not in line with the true cost and profit principle.
An online respondent to “Why Are Plumber’s Prices So High?” wrote, “I’ve heard that plumbing is ‘a drain surgery, not a brain surgery’ but they charge almost as neurosurgeons. Do the plumbers work harder than neurosurgeons? ... They should be investigated for the price fixing!”
Website searches for price-fixing lawsuits concerning unionized plumbers and electricians come up empty. Most lawsuits are big-ticket lawsuits against large corporations in the pharmaceutical, oil, communications, and other industries.
“When you can lock out competition, it makes it much easier to artificially—and illegally—set prices and bar competition,” the Hagens Berman LLP law firm said in a press release about a price-fixing lawsuit against the technology industry.
