Price Fixing !

Shoppers visiting the laundry aisle of their local supermarket are dazzled by the array of laundry products on offer and the claims that are made about their efficiency.  Behind the scenes a very small number of manufacturers produce a great number of competing products, and in recent times a price scam has come to the attention of the Australian Competition and Consumer Commission ( ACCC ).

These manufacturers discovered that producing an ultra version of laundry powders could deliver savings on the production costs of standard powders and because less was needed to obtain the same results, smaller packs delivered an extra bonus by way of reduced transport costs.

A major share of grocery sales in Australia is in the hands of a duopoly and so the laundry detergent manufacturers and the duopoly got their heads together and concluded what is termed a " gentleman's agreement ".   They decided not to pass on the savings to the retail customers and maintain a uniform price by mutual agreement - and to deliberately manipulate stock levels to mask this deception.This is exactly what the ACCC terms a  " price fixing cartel " and it is illegal.   Prosecutions are being processed through the court - and the fines imposed are heavy.

Woolworths has just been slapped with a $9 million  penalty,  Coles received a fine of $ 18 million,  Manufacturer Colgate Palmolive was asked to pony up a further $ 18 million and P Z Cussons is waiting in trepidation to find out what impost it will earn.     Unilever has been granted immunity -because they were the one which blew the whistle and brought this cartel to the attention of the ACCC.

The tactics used by the ACCC is what gives the leaders of errant merchant empires sleepless nights.  Very cunningly the ACCC is offering immunity to the first to break silence and provide the incriminating evidence that enables a cartel to be unmasked.  There are no second prizes.

It is not just the monetary penalty that causes jangled nerves. Knowingly engaging in corrupt conduct can lead to the principals serving prison time, which means that members of a cartel are anxiously watching their co-conspirators for signs of stress.   Who will be the first to jump ship - and save themselves ?

It also delivers a clear warning that executives of companies need to be very careful of the company they keep and their mix of social activities.   Even playing a friendly round of golf with a competitor could be construed as an illegal meeting if suspicion of clandestine activities arise.  Memberships of trade associations deliver similar hazards.

This whole matter of ethics is not clear cut.   If by ingenuity a manufacturer finds a way to reduce the production cost of a product they are not legally obliged to reduce the price to the public.   They are entitled to pocket that extra profit as a reward for that ingenuity.  What becomes illegal is when they conspire with others to manipulate availability or maintain a uniform price level to deliver a higher profitability - hence the term " price fixing " !

What will now interest many is the fallout from these prosecutions.   What happens to the senior executives on whose watch these illegal activities occurred ?   Will they retain their positions and the huge fines be simply accepted as " the cost of doing business " - or will they be dismissed, suffer a salary loss and probably end promising business careers ?

That is what will deter many from even thinking of entering into such an arrangement in the future !