An oligopoly is a market structure where a few large firms dominate the industry and control the market price. Members of an oligopoly often engage in collusion, where they agree to set prices and production levels to increase their profits.

This agreement among members of an oligopoly to set prices and production levels is called price fixing. Price fixing is an anticompetitive practice where firms agree to fix prices to avoid competition and maximize their profits. This can be done through direct communication, such as meetings where price agreements are made, or through tacit collusion, where firms signal their intentions through pricing behavior.

Price fixing is illegal in most countries, including the United States, under antitrust laws. The Sherman Act and the Clayton Act are two primary laws that prohibit price fixing in the US. These laws were enacted to promote competition and protect consumers from unfairly high prices.

The penalties for price fixing can be severe, including fines and imprisonment. In the US, fines for price fixing can range up to $100 million for corporations and $1 million and ten years in prison for individuals. The European Union imposes fines of up to 10% of a company`s global turnover for violating antitrust laws.

Price fixing can have serious consequences for both consumers and other firms in the industry. It can lead to artificially high prices and reduced output, limiting consumer choice and harming competition. It can also create barriers to entry for new firms trying to enter the industry, further entrenching the oligopoly.

In conclusion, an agreement among members of an oligopoly to set prices and production levels is called price fixing. This anticompetitive practice is illegal in most countries, including the US, and can result in severe penalties. Price fixing harms competition and consumers, and antitrust laws exist to prevent it.