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Brianslawn
02-23-2006, 01:47 AM
lets say only you and 3 other companies offer a certain service or product in your area. all four companies are friends and help each other out in emergencies and so forth. you and other three companies get together and decide to set a minimum charge for your product or service that is higher than anyone else in country charges. you each can charge even more if youd like, but none of you will go below that fixed minimum. service or product is in high demand and no one else offers it in area, so customers pay the unusually high price for it without much complaint.

is anything wrong with this type of business strategy or is it pure supply and demand economics. the service or product is considered a luxury, and customers are rich, so no gouging of old ladies on medicine is taking place. :confused:

Luvs2Play
02-23-2006, 01:53 AM
It seems to be common in smaller towns around here. Maybe it's a good thing, the customer is probably paying what the service is worth. On the other hand, the oil companies were getting over $4.00 per gallon, IMO we weren't getting a fair deal.

oasislawns
02-23-2006, 02:09 AM
I am pretty sure this is illegal. I am a business major doing lawn work part time and I believe I remember learning in one of my classes this is illegal but I am sure it goes on in many different types of business so as long as you don't get caught:) I guess it does not matter. I don't think anyone is trying to hunt down a few lawn companies for price fixing but at the same time I would not tell anyone what I was doing.

work_it
02-23-2006, 02:34 AM
So far it sounds like Luvs2play and oasis (Greg) hit the nail on the head. Price fixing is illegal, but you have to be caught. Even if you're caught the burden of proof would be on your accusers shoulders.

K.Carothers
02-23-2006, 02:35 AM
So far it sounds like Luvs2play and oasis (Greg) hit the nail on the head. Price fixing is illegal, but you have to be caught. Even if you're caught the burden of proof would be on your accusers shoulders.

...or posted on this site.

btw, it's 100% illegal.

kc

Brianslawn
02-23-2006, 02:51 AM
again, hypothetical situation based on what oil companies are doing with the help of bush. just wondering if its right or wrong, or if it can apply to the mowing business.


i know gouging in time of emergency is illegal, but what about a luxury item?

i spent $4.00 for a hot dog and coke in hilton the other night for the iowa state game. thats more than i would spend at a fancy restaurant. was that illegal price fixing since all vendors were charging same high price?

Tinkerer
02-23-2006, 03:18 AM
My last year in Rochester Mn I called a bunch of the other lawn services sometime during the mowing season wondering how they were making any money and suggested everyone stop charging just $17 for the average lawn (1994). It was pretty much deaf ears on the other end. Now if its a general and acceptable minimum charge say $30 per lawn, I don't think thats wrong. But if all 4 guys decided to charge $60 per lawn mowing minimum in average little town,,, then I think there might be a problem. Now and then contractors get into trouble for price fixing on projects for roads or something for the goverment. I don't think that would be pretty to be convicted of something like that.

Richard Martin
02-23-2006, 04:28 AM
i spent $4.00 for a hot dog and coke in hilton the other night for the iowa state game. thats more than i would spend at a fancy restaurant. was that illegal price fixing since all vendors were charging same high price?

This is a different situation. It's okay for a hotdog salesman to take a walk and see what the next guy is charging for hotdogs and then raise his price to match it. It a whole seperate thing for businesses to sit down and conspire to and then set a minimum price.

I'm very good friends with 2 other lawn services in my area. We have lunch together, sell equipment back and forth etc.. We do talk about pricing but it's more along the lines of an individual piece of property like asking how much would you charge and stuff like that. It's an advice type of thing you know, just like we do here at Lawnsite.

ArkansasLawns
02-23-2006, 08:01 AM
Brianslawn

Just what is this service or product that you provide? How much are you charging for it?

Hypothetically, of course

Green-Pro
02-23-2006, 09:49 AM
Brian heres some info on price fixing from the Fair Trade Commision.

http://www.ftc.gov/bc/compguide/illegal.htm


I'm not trying to advise you on this practice, but would advise you on another related issue:

Be sure to pack your "bullseye" underwear before arriving at the Federal lockup :laugh: :laugh: :laugh: :laugh:

walker-talker
02-23-2006, 10:25 AM
Entrepreneurship was my major in college, but never received a degree. Even basing prices according to competition's prices is illegal, but like someone mentioned.....how can anyone really prove it!!

mulcahy mowing
02-23-2006, 12:02 PM
http://business-law.freeadvice.com/trade_regulation/price_fixing.htm

I dont think this is right we should try to turn this law around with all the lowballers around it's just not right.

cush
02-23-2006, 02:12 PM
don't call it price fixing. CCall it unilateral pricing. Maytag and whirlpool do this on their front load washers and it is legal.

Freshcut Lawn Care
02-23-2006, 02:34 PM
Brianslawn,

I like the idea, but alway had my own reservations (due to the legality of it).

I have generally discussed pricing concepts with a few operators, but we have never reached any type of agreement on a fixed price.

I do however, always try to keep educating others (myself included) the true value and costs of what we are doing and I think we should strive to be paid what we are worth. If I feel they are not charging enough, I am very open about it especially if I know them well!

If another company wants to lowball me, that's their perogative and I am not going to lose sleep over it!

Remember, there is enough work for everyone!

I try to win and keep our customers on delivering Quality results, on time and maintaining good customer relations (communications).

We seem to do very well, and honestly, don't lose many customers because of our Quality. The odd customer may be price senitive and go for a lower price, but my experience is many do not!

I would like to start and be part of a local association in our area, where competitors could discuss stuff , like we talk about here on lawnsite, but haven't gone any further yet!

Good topic!

grassyfras
02-23-2006, 04:05 PM
Its not ethical thats for sure.

bushvelt
02-23-2006, 05:01 PM
If you control the area,"no one else offers it in the area", I'm sure that there has got to be some elderly on meds there. Some folks only look like they have$$$. Widows on fixed incomes that just happen to still own the big house.

steve45
02-23-2006, 07:12 PM
again, hypothetical situation based on what oil companies are doing with the help of bush.

Well, Brian, your ignorance is showing.

Bush has nothing to do with high oil prices. In fact, he has tried to get the house to approve drilling in ANWR, which would LOWER oil prices.

The oil companies don't set the price for oil either. It's called a 'commodity', like wheat and pork bellies. The price is set by the New York Mercantile Exchange (NYMEX). It's just like the farmer that doesn't get to set the price for his crop, the oil companies don't set the price for their oil. The only difference is that the farmer can refuse to sell his crop if the price is too low. The oil companies (in Texas at least) cannot refuse to produce oil if the price is too low.

Brianslawn
02-23-2006, 11:20 PM
Well, Brian, your ignorance is showing.

Bush has nothing to do with high oil prices. In fact, he has tried to get the house to approve drilling in ANWR, which would LOWER oil prices.

The oil companies don't set the price for oil either. It's called a 'commodity', like wheat and pork bellies. The price is set by the New York Mercantile Exchange (NYMEX). It's just like the farmer that doesn't get to set the price for his crop, the oil companies don't set the price for their oil. The only difference is that the farmer can refuse to sell his crop if the price is too low. The oil companies (in Texas at least) cannot refuse to produce oil if the price is too low.


yes and someone can refuse to buy a ferarri if the price is too high at all 4 dealerships. someone else can also start a new dealership in the area offering buicks. but if the population would rather have ferarris than buicks, then that is simple supply and demand. the buick dealership will fail, and like the price of heating oil rises in the winter... the cost of a ferarri will go up in the summer.

drilling for more oil. would that really help the price? arent oil companies already recording record proffits? i know i would if i trippled the price for my yards all of a sudden. what about when the new oil is all consumed? that little old lady can live without a ferarri, but when theres no alternative for fueling the buick... then what? :hammerhead:

as for the hot dogs.... i decide $2 for a hot dog and $2 for a coke is too much. food is a necessity, not a luxury. i buy them cheaper at hy-vee and attempt to bring them into the game not for resale, but for my own consumption. i am stopped as they say that is not allowed. is that still fair business practice or is their attempt to limit my ability to shop at an outside competitor becoming unethical?

no, i did not try taking my own hot dogs to the game. just giving the few intellects an anology to ponder.

lets make it simple for the kiddies. all 4 companies do irrigation systems. pure luxury. nobody needs them to survive. the lady on meds has no use for one. only the wealthy who WANT them to improve their social status. the companies arent trippling the cost of the systems, just deciding they are a pain in the @$$ to install and agreeing on a minimum price per foot for the systems. they can freely charge more for them, however, no one has to worry about lowballing, unless someone else decides to start their own sprinkler biz.

price fixing strategies may very well be illegal, but they are occuring more often than you might think. :hammerhead:

Brianslawn
02-23-2006, 11:34 PM
on a side note, what if all 4 irrigation companies were owned by the same person... hence, their is no agreement on pricing. on person setting the price on all his companies.

also according to the one link the mowjoes that come along offering below average prices are in violation of the same or similiar law, as they are attempting to monopolize the market by lowballing and driving out the competition.

no, i dont have a sprinkler monopoly, either. only monopoly i have is the rail roads.

Gautreaux's LNG
02-23-2006, 11:36 PM
BASF and DuPont just got hammered for this a few years ago. Automobile paint... they owned the market and got together and set the prices high! They we're busted and cost them MILLIONS!!

I have a friend who owns a local health club and at the time they were only 3 located in town, he was approached by the owner of one of the other gyms and asked if all 3 raised their prices...from 25 to 40 a month they'd all get richer?

It happens, easy to do in specialized trades where they are not many providing the service... never work in lawncare to many weekend warriors and high school kids who'll work for less!

JimLewis
02-24-2006, 02:46 AM
Price fixing is wrong and unethical and in most cases it's illegal too.

The only time price fixing is considered legal is if it's done by employees. When 2 or more companies get together and agree to only work for a certain minimum price, it's called illegal price fixing and people get thrown in jail. But for some stupid reason, when 2 or more PEOPLE get together and and agree to only work for a certain minimum price, that's called a UNION, and for some stupid reason, that's legal. Go figure!

IMO, price fixing should always be wrong and illegal. True equality and optimum opportunities only exist in a truly free market where the free market laws of supply and demand drive the market. When price fixing exists, whether it be on the employee side or on the company side, then we aren't really operating in a truly free market.

Green-Pro
02-24-2006, 08:41 AM
Well it is supply and demand to some extent when referring to the oil situation Brian. The thing you fail to mention is that the true bottleneck and reason for higher prices is directly attributable to lack of refining capacity. In other word it would make no difference if the oil companies had one Gazillion (is this a word? :laugh: ) barrels of oil at their disposal, the maximum capacity to be refined will not change.

Now IMO the reason we have this lack of refining capacity is due to restrictive EPA regulations monitoring the construction and use of such a facility, regulations not put in place by the current administration. These regulations IMO are in place because of liberal tree hugging s.o.b.'s, and they have been in place for many years now (at least twenty).

Back to supply and demand, given our limited refinindg capabilities it really doesn't take a rocket scientist to see the direct correlation to price in regards to the average consumer. I believe it would be a different story if the capacity to refine (given new refineries) were allowed to keep pace with demand at a reasonable rate.