Sotheby's and Christie's, the two largest fine art auction houses in the world, were earning low commissions in the 1990s, as sellers negotiated simultaneously with both firms for the best rates. Sotheby's CEO, Dede Brooks, secretly met with CEO Christopher Davidge of Christie's, to establish together a fixed, nonnegotiable rate structure. This had the effect of illegally fixing prices and reducing competition. The deal was exposed, and the auction houses paid settlements to sellers that totaled $512 million, in addition to federal fines. The conspirators, and the chairmen that were their superiors, lost their jobs and received jail time or probation from federal courts. Which stakeholders were hurt by the price fixing action?

Correct Answer: In this case, illegal price fixing led to higher commissions paid by sellers. It also might have contributed to buyers paying higher prices, as sellers tried to recover some of their additional expenses. Finally, it was not in the best interests of shareholders, because the lawsuits and fines led to lower profitability.