Three of the most recent price fixing cases in macroeconomics and microeconomics nowadays happened in Texas in February 2006; in Chicago, which happened in December 2006; as well as the incident in August 2006 when physicians groups were charged with price fixing to protect competition in the microindustry.In the first case, the doctors of the Independent Practice Association (IPA) in Texas agreed when it was charged by the Federal Trade Commission, stating that “it engaged in unlawful collective bargaining to set fees its members would accept from health insurance plans and advised its members against dealing individually with plans” (Federal Trade Commission, 2006, par. 1).These two practices, as stated by the Commission, resulted to higher medical costs on the side of the consumers—a conduct that was described by the Commission as ‘anticompetitive’, as it restrained competition by violating Section 5 of the FTC Act (Federal Trade Commission, 2006, par.
1). In the second case, however, FTC charged some 2,900 independent physicians in Chicago for “refusing to deal with certain health plans except on collectively determined terms” (Federal Trade Commission, 2006, FTC charges Chicago).This also restrained active competition in the microeconomy, violating Section 5 of the FTC Act by engaging consumers to collectively negotiate the prices and terms without justification of the conduct (Federal Trade Commission, 2006, FTC charges Chicago). Lastly, in the third case, some physician groups were charged with price fixing, as two IPAs in Kansas City “refused to deal with health care plans, except on collectively agreed-upon terms, including price” (Federal Trade Commission, 2006, FTC charges physician groups).Like the two other cases, this also restrained active and fair competition in the microeconomy, as it violated Section 5 of the FTC Act by restricting the traditional competition in the market, according to FTC’s Bureau of Competition Dir.
Jeffrey Schmidt (Federal Trade Commission, 2006, FTC charges physician groups). In the current micro and macroeconomics that were shown in the three cases mentioned above, it is evident that the market structure offers an environment where pure competition is at stake, as a number of firms or associations were charged with the violation of Section 5 of the FTC Act.It also revealed a structure that is far from conducting freedom of entry and exit, since the consumers or the respondents were bound to negotiate collectively, which usually leads to higher costs and profits. Manipulation of consumer behavior in the said cases conversely forbid the use of independent decision making, prohibiting the application of freedom of entry and exit, leading to the consumers’ anxiety in dealing with higher production costs.In the microeconomy, this issue could possibly lead to discriminating monopoly, as firms charge different prices and offerings for the same type of product or plan that should have been offered in the same rate as the other firms in the microeconomy.
Thus, by monopolizing the consumers, the firms and associations pushed too far the role of profit-maximizing activities. In the international trade, however, this can affect the process by negatively influencing price elasticity of demand and supply, restraining active and fair competition between firms in the industry. This is when the government has to enter the country’s market economy.There has to be the process of price fixing, in order to engage a more vigorous and dynamic market structure that is improved by freedom of entry and exit, by independent decision making, and by means of lower product costs. The three cases mentioned above reveal present potential issues when it comes to the ethical and legal concerns of trading, especially that the charged act prohibits consumers from extending their rights as being independent and self-determining.
When it comes to these areas, the best solutions rely on price fixing… and the keenness to see and react accordingly.
