What is the term for an illegal agreement among members of a group to set prices at a certain level to avoid competition?

• A. Price fixing
• B. Monopoly
• C. Patent pooling
• D. Restraint of trade

Answer: (A)

Setting prices through an agreement among competitors is price fixing. This term captures the illegal collusion where rival firms agree on the price, or on price-related terms, rather than letting market competition determine them. By removing price competition, it harms consumers and other businesses and is treated as a per se violation of antitrust law in many jurisdictions (in the United States, under the Sherman Act). Even though there can be legitimate joint activities between firms, any formal or informal agreement to fix prices crosses the line into illegal conduct.

A monopoly describes a market with a single seller, not a collusive pricing scheme. Patent pooling refers to multiple firms sharing patents to coordinate development or licensing, not to fixing prices in the market. Restraint of trade is a broad category of illegal agreements that restrain competition, and price fixing is a specific, common example of such a restraint.