EU fines Dole and Del Monte for banana price-fixing

The European Union fined Dole over $60 million for engaging in price-fixing on bananas. A German company, Weichert, was fined $20mil, but Del Monte will have to pay the fine because they owned Weichert at the time of the violations. Chiquita escaped fines by blowing the whistle:

Chiquita also participated in this activity, but the EU’s competition commission said it could not have opened the investigation without that company’s initial cooperation.

Chiquita escaped a fine of $113 million (83.2 million euros) by bringing the activity forward and applying for leniency, EU officials said in a press release.

Government investigating price-fixing in food

USAToday reports that the Justice Department is investigating allegations of price-fixing in two more categories of the US food market -- tomatoes and eggs (they have been investigating citrus for the past year).

These investigations are into price-fixing not by manufacturers, but by producers -- farmers and cooperatives.

Although federal law bars competitors from collaborating when setting their prices, Congress has created antitrust exemptions intended to help small farm groups and cooperatives bargain with large food processors.

Inquiries into whether food producers overstepped those limits are being run by federal prosecutors in Sacramento, and an antitrust division of the Justice Department based in Philadelphia.

A separate report, a few days previous, in the Wall Street Journal, said that the Commodity Futures Trading Commission (CFTC) is investigating the dairy industry, specifically Dairy Farmers of America, a cooperative that processes one-third of the nation's milk.

According to the Journal report, the CFTC is investigating whether DFA drove up the prices of milk and cheese futures through strategic trading of cheese contracts on the Chicago Mercantile Exchange. Because DFA purchases milk from farmers based in part on the prices of dairy futures, this would amount to an illegal maneuver to increase the price of milk.

OFT investigating price-fixing in British supermarkets

The UK's Office of Fair Trading has launched an investigation of British supermarket chains and leading suppliers over allegations of price-fixing.

The OFT is understood to have made visits to the head offices of Tesco, Asda, Sainsbury's and Morrisons and to some of their suppliers. The supermarkets are understood to be co-operating with the investigation.

Tesco said in a statement: "We understand that the OFT has asked for information from a wide range of suppliers and retailers. We are working with them to provide what they require. At Tesco we are confident that we always act in the interest of consumers."

The move comes just days after the OFT announced it was looking into allegations that 11 retailers, including Asda, Sainsbury's and Tesco, and manufacturers were working together to fix cigarette prices.

I will update this post later because The Economist has an excellent article that I read on the plane today, and I want to add some of its info (but at the moment I don't have the time).

Update: The Economist adds the names of several suppliers who have been asked to provide pricing info: Britvic, Coca-Cola, Mars, Nestlé, Procter & Gamble, Reckitt Benckiser and Unilever. They also refer to it as rather a big deal:

(This) may turn out to be one of the world's biggest and most widespread investigations into the possibility of price-fixing. The investigation involves thousands of products, from soap to cola, and some of the world's largest consumer-goods companies.

They also make two interesting points. One is that the American antitrust tactic of encouraging whistle-blowing by offering immunity seems to be spreading to Europe, a point partially confirmed by an article in today's Daily Telegraph, which names Asda/Wal-Mart as the whistle-blower:

In blowing the whistle, Wal-Mart, which owns the Asda chain, has guaranteed itself immunity from a fine should the OFT discover any cartel activity. Any company found guilty could be fined up to 10 per cent of its annual worldwide sales, which in Wal-Mart's case would be $37bn (£18.7bn).

The move is likely to make the US retailer deeply unpopular with the companies involved, many of whom are its largest suppliers.

The other interesting point is that what is alleged is price-fixing on brands, rather than the more classsic commodity pricing:

Every economics student learns that cartels are most likely to crop up when firms have least protection from cut-throat price competition. The typical cartel product—vitamins, paper, petrol, glass, bulk chemicals—is a commodity offering scant opportunity for the branding that might create some pricing power. The industry is usually mature, with stable market shares and little innovation. This dullness has a virtue for a would-be cartel: it makes it easy to check if rival firms are sticking to the market-rigging plan.

They point out that the UK supermarket category appears to compete aggressively on price (although this is the third major probe of price-fixing, a dairy products investigation resulted in over 100 million pounds in fines recently, and only a few weeks ago OFT announced an investigation of tobacco price-fixing).

What they failed to bring up is that a highly-concentrated retail sector increases the likelihood of price-fixing. The four big UK chains have a combined 75% share of market -- coordinating among four is much easier than if a market has many significant players.

They do mention that buyers may have a motivation to fix prices even if their employer doesn't: "Often they are free to set selling prices and are paid bonuses linked to targets on sales and profits relating to the products they manage."

This will be interesting to follow, and I'll try to post additional info as it becomes available.

Can "MSRP" be mandatory?

There was an interesting case argued at the US Supreme Court last week -- Leegin Creative Leather Products v. PSKS Inc. -- which raises the question of whether manufacturer-dictated pricing constitutes a per se antitrust violation.

Leegin is a small manufacturer of quality leather goods, which had sought to create a niche by selling only through boutiques:

Leegin's marketing strategy for finding a niche in the highly competitive world of small leather goods was to sell its Brighton line through small boutiques that could offer personalized service.

Retailers were required to accept its no-discounting policy. Leegin did not dispute that this amounted to price fixing, but argued that consumers benefited from the extra care that the retailers' guaranteed margin enabled them to give to promoting and servicing the products.

Leegin cut off Kay's Kloset for cutting prices -- Kay's parent company sued and won in the lower courts. The issue before the Supremes is whether having mandatory pricing is always illegal ("the per se rule") or whether it may be legal if it makes sense under certain circumstances ("the rule of reason").

If the court does use this case ... to overturn the per se rule, resale price maintenance would not automatically be legal. Rather, any challenge to an agreement between a manufacturer and retailer to forbid discounting would be subject to the "rule of reason," a familiar concept in antitrust law under which courts evaluate the anti-competitive effects of a marketing restriction case by case.

The results of this case could have significant ramifications for marketers, and it will be interesting to see the outcome.

More chip price-fixing?

A couple weeks ago, we reported on fines being assessed for price-fixing in the computer memory biz.

It appears the problem goes deeper. This is from The Economist's weekly email newsletter:

Investigations widened on both sides of the Atlantic into the latest allegations of price-fixing among chipmakers, which this time focus on fast-memory SRAM chips. Sony said it was co-operating with an inquiry by America's Justice Department into industry-wide practices. Meanwhile, European regulators raided the offices of several chipmakers as part of their investigations. One of the companies reportedly targeted was Samsung, which was fined $300m last year by America after admitting to price-fixing in slower DRAM chips.

Price-fixing in the memory biz

In the latest development into a long-running Department of Justice investigation into price-fixing in the memory chip trade, three more executives have been indicted:

A federal grand jury in San Francisco handed down indictments Wednesday against two executives from Samsung and one from a Hynix U.S. subsidiary, the Department of Justice said in a statement.

The indictment charges that Samsung executives Il Ung Kim and Young Bae Rha and Hynix's Gary Swanson participated in the conspiracy during 2001 and 2002, the government said.

Eight other execs from the two companies have already entered guilty pleas.

In all, four companies and 16 individuals have been charged as a result of the long-running memory chip investigation. The probe also has resulted in fines totaling more that $731 million.

DoJ investigating music industry

The Department of Justice announced that it's investigating the music industry -- apparently in regard to possible collusion in pricing of music downloads.

...two music industry sources said on Thursday the DOJ's probe appeared to be focused on ... whether the labels colluded to set wholesale pricing for song downloads.

The investigation also could be related to licensing renegotiations with Apple Computer Inc.'s, maker of the wildly popular iPod digital music player, for its iTunes music store, industry sources have said.

The major players in the industry were smacked down a few years back by the Federal Trade Commission for collusion in regard to minimum advertised price policies in their advertising programs, which the FTC said amounted to price-fixing. One wonders if (in the event the allegation pan out) the previous case would cause this to be viewed as a "repeat offender" situation.