In a competitive market, prices are determined by supply and demand. Price recommendations by trade or professional associations, binding or non-binding, harm the competitive process through the distortion of independent pricing decisions. A likely outcome is that sellers are induced to cluster their prices around the recommended levels, irrespective of their individual business profiles such as costs, service standards and target customers.
Recommendations of minimum prices, in particular, discourage price competition. When producers believe that other competitors will adhere to the minimum fee, they have an incentive to follow suit instead of cutting costs and prices where possible. Even recommendations of maximum prices can be anti-competitive as they may lead to a convergence of prices at or just below the maximum level. They may also dissuade producers from offering premium products that should rightly be priced above the maximum level, thereby reducing choice for consumers.
In some cases, price recommendations can harden into price fixing which is one of the most serious forms of anti-competitive behaviours and has been shown to result in significant over-charging, borne by customers.
Competition authorities worldwide have found that price recommendations and fee guidelines, mandatory or voluntary, are generally harmful to competition. Similarly, CCCS adopts a rigorous standard in evaluating various price recommendations in Singapore and has found no exceptions to date.
CCCS encourages all businesses to set their prices independently and not use price recommendations issued by trade and professional associations as a form of justification for charging higher prices. CCCS supports price transparency and is of the view that businesses should be upfront about the price they charge customers and avoid imposing hidden charges.