Have the companies engaged in horizontal price fixing

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Reference no: EM131390691

During a period of a few years, intense price competition characterized both the retail and the wholesale oil markets. At times, prices in the wholesale market fell below the manufacturer's cost. One cause of the volatile situation was the supply of ‘‘distress gasoline'' placed on the market by seventeen independent refiners. These independent refiners had no retail sales outlets and little storage capacity, so they were forced to sell their product at ‘‘distress prices.''

In spite of their unprofitable operations, they could not afford to shut down, for, if they did so, they would be apt to lose both their oil connections in the field and their regular customers. In an attempt to remedy this problem, the major oil companies entered into an informal agreement whereby each selected as its ‘‘dancing partner'' one or more independent refiners having distress gasoline. The major oil company would then assume responsibility for purchasing the independent's distress supply at the ‘‘fair going market price.''

As a result, the market price of oil rose and the spot market became stable. Have the companies engaged in horizontal price fixing in violation of the Sherman Act? Why? As a result, the market price of oil rose and the spot market became stable. Have the companies engaged in horizontal price fixing in violation of the Sherman Act? Why?

Reference no: EM131390691

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