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If It Ain't Broke . . .

Don't even try to fix prices with competitors.

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This story appears in the June 2005 issue of Entrepreneur. Subscribe »

To price any item or service, you need some idea of what the competition is charging. Otherwise, your price might be so high that no one will buy, or so low you can't make a profit. Why not just sit down with your competitors and agree on the same nice, fat price?

Do that, and you run afoul of the Sherman Anti-trust Act, which has prohibited price fixing in the United States since 1890. Designed to encourage healthy competition, the law forbids companies from entering "contracts, combinations or conspiracies" in restraint of trade. If customers or competitors suspect price fixing, they can file a complaint with the FTC. Violating the Sherman Anti-trust Act is a felony, subject to fines of up to $10 million or jail terms of up to three years. And injured customers or competitors can sue for up to three times their actual damages.

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