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Could your competition work together to undercut your prices?

Dec 17, 2021 | Business Litigation

Knowing your competition is a big part of being successful in modern business. Understanding what competitors have to offer and what they charge for similar products or services can help you better market your own brand and establish your niche in the industry.

Although competition often leads to innovation and creativity, it can also lead to individual misconduct. There are some people who will do just about anything to dominate their industry. They might even choose to work with some of their biggest competitors to jointly challenge your business.

When multiple businesses join forces to target another, the situation can easily constitute unfair competition. One particular tactic is not just unfair, it is typically illegal.

Price-fixing is unfair for competitors and for consumers

When two or more businesses that typically compete against one another decide to cooperate, they can have a drastic effect on the local market. For example, if they agree to the same standard pricing that is lower than what your business can charge while making a profit, more potential customers will hire or buy from your competitors rather than from your company.

Setting prices so low that they affect the company’s short-term profits could be a way to dramatically reduce the flow of consumers to your business. If you give up and close your doors, your competitors can then go back to charging whatever they want for their goods or services, possibly gouging consumers to make up for the months of undercharging to push your company out of business.

How do you fight back against price-fixing schemes?

It could be quite challenging to conclusively prove that your competitors engaged in an illegal price-fixing scheme. However, especially in scenarios where multiple competitors all changed their pricing models in a short amount of time or when their current rates do not reflect the market value of services or goods, you may be able to demonstrate to the courts how your competitors have banded together try to force your company out of the industry.

You may be able to file a lawsuit against the companies involved. Reporting documentation of price-fixing to federal agencies could also result in anti-trust enforcement action. Learning about how companies violate business laws through unfair competition could make identifying such practices easier. Taking action through business litigation can help you stop such unfair practices and possibly receive compensation for the damages your company suffered.