Critical Thinking Sample Paper on Price Fixing
Price fixing occurs when two market players agree to buy or sell a good at a fixed price. Prices can be set manually or through influencing the demand and supply of the market. Companies do this through controlling the supply side of the economy where they hold a monopoly or a duopoly power (Connor). The main reason why companies undertake price fixing is to push prices high with an intent of maximizing profits. The Maricopa county medical society is a professional group that protects all medical practitioners and pharmacists in the state of Arizona. The society insures doctors against non-payment of bills by patients. The foundation established a fee guideline which all medical doctors had to adhere to. One could not charge higher or lower below the price level. As a result of complaints from the public the State of Arizona sued the medical society over price fixing claims. In a case, Arizona Vs Maricopa county medical society. The supreme court ruled in favour of Arizona and it was held that price the act of price fixing violated the Sherman antitrust act. The move by the medical society was seen as trying to maximize profits from insurance policy holders a wrong objective in the medical services field. The decision restrained trade both within the United states and foreign nation which is illegal(Backman).
The Sherman antitrust Act allows businesses to be competitive and hence prevents any act of predatory pricing. It argues that a competitive market leads to good services in the market and the customer should always be held as the king. The government should avoid monopolistic tendencies that may harm the consumers and market players should always compete fairly. The law prohibits artificial raising of prices by suppliers through influencing the supply side of the economy. The main goal of the Act is to ensure that the consumers are not harmed from abusive trade agreements. It condemns entities that form cartels and monopolies with an aim to prevent free market (Backman,38). The foundation was found wrong as it restrained trade among other medical practioners who were compelled to charge as per the price guideline. The supreme court argued that the move by the foundation disadvantaged other insurance players in Arizona. The medical sector was being transformed into a profit making industry instead of non-profit service industry which is illegal. Only the rich insurance industry could meet the price expectation by the foundation hence locking others. The state of Arizona had the stipulated bill that was affordable to many residents and all health institutions had to comply.
There are more than 200 federal agencies that deal with market related issues and trade competition. Given that Maricopa foundation deals with medical practitioners and pharmacist. The department of human medicine regulates prices so that drugs are affordable to the market. The department of law and justice ensures that all companies both local and multinational adheres to antitrust legislation to prevent anticompetitive behaviours which not only harm single businesses but the whole economy (Connor, 98). Commerce and technological agencies ensure that businesses adhere to laws and regulations guiding commerce in the country. The office of labor formulates labour laws to be followed by all market players. The agency dealing with human medicine can be eliminated since commerce and technological agency can handle pricing challenges. Law and justice can be replaced with the department of justice for they handle the same task. Human resource service can be eliminated against Labour affairs. Through elimination of some agencies it will be easier to focus on a strategic goal for proper regulatory measures to guide price fixing.
Connor, John M. “Global Price Fixing.” Berlin: Springer, 2014. Print.
Backman, Jules. “Adventures in Price Fixing”. New York: Farrar & Rinehart, Inc., 2013. Print.