When federations become a part of my colony, this will make more sense. A galactic empire is a group of at least 10 federations. A galactic empire acts as a single trading platform where everybody sells their resources at a fixed price (OPEC would be a real-world example of how this works). This gives colonies a chance to make a decent profit off of their resources.
who fixes the prices?
https://www.my-colony.com/colonies/dNDgEef6/
https://www.my-colony.com/colonies/4GLdZllJ/
Every federation gets 1 vote. That vote is controlled by the member colonies of the federation. It is similar to us elections, except there is no electoral college.
galactic empires give power to smaller colonies