Price-fixing question

[Cardinal]

Do parties have to actually discuss the idea of price-fixing to be convicted of it? Let's say there are 4 big players in a particular industry, and they all keep their prices what is considered "artificially high" or whatever the term is by those who decide to bring/prosecute a lawsuit. Is it possible that they can get found guilty even if the 4 big players never actually discussed price-fixing?

[alil'britdifferent]

I'm not a lawyer and only have working knowledge of Anti-Trust, but I would guess that it would be difficult to bring a conviction if each of the 4 parties could make reasonable justification of their profit margins.

Profit is a strange animal though. One industry might be happy with a 5%, others might be able to justify 50%.

[Lotus Fury]

No collusion, no price fixing.

Price fixing - What is it?

Most price fixing is done through a third party - a common supplier/vendor or a trade group. Big retailers can in effect tell the supplier what they want other retailer's prices to be, and the supplier can enforce minimum sales or advertised prices on smaller retailers. Up to last year minimum sales price agreements were illegal but minimum advertised prices contracts were allowed. Since that change big retailers and suppliers have been more easily able to set pricing for items - think video game consoles, TV, etc. It's one of the reasons that you'll rarely if ever see something like a PS3 or Wii go on sale. It's also why you'll see so many "Click here for the price" things. It's a requirement from the manufacturer that if a price goes below a certain threshold that they can't advertise it directly. It makes it harder on the discounters and easier on the big retailers.

[evomind]

Originally Posted by Cardinal

Do parties have to actually discuss the idea of price-fixing to be convicted of it? Let's say there are 4 big players in a particular industry, and they all keep their prices what is considered "artificially high" or whatever the term is by those who decide to bring/prosecute a lawsuit. Is it possible that they can get found guilty even if the 4 big players never actually discussed price-fixing?

sorta like in the movie "the informant?"
yes, to prosecute you usually need direct collusion. the law is tricky though and there can be exceptions and strange cases.
thats why you can have 2 million dollar lawyers argue the same case with 2 totally different viewpoints.

[Cardinal]

Thanks for the responses everyone. No collusion = no price fixing is just what I was after.

[SweetDaddyD]

Originally Posted by Cardinal

Thanks for the responses everyone. No collusion = no price fixing is just what I was after.

Are you planning on fixing the price on something?

[DrJ]

Originally Posted by SweetDaddyD

Are you planning on fixing the price on something?

Just making sure everyone has their stories straight ahead of time...

[Cardinal]

Originally Posted by SweetDaddyD

Are you planning on fixing the price on something?

No, no. I just wanted to know if a charge of price fixing could be used against an industry to get their prices down.

[xtn]

Who decided the prices in this mystery industry are "artificially high?" What basis did they use? Anything concrete? Or they just want lower prices and think they can force them with a lawsuit?

Hey judge, the MSRP at dealership-A and dealership-B is the same. It's obviously illegal price fixing. I want you to court-order one of them to sell me a Lotus at a discount!

xtn

[Lotus Fury]

In neo-classical economics, price fixing is inefficient.

Price fixing - Wikipedia, the free encyclopedia

Google

Tons of cases of it, hard to prove. Price fixing, by companies or government, isn't a free market principal. Market should dictate prices, not suppliers or government.

[Cardinal]

Originally Posted by xtn

Who decided the prices in this mystery industry are "artificially high?" What basis did they use? Anything concrete? Or they just want lower prices and think they can force them with a lawsuit?

Hey judge, the MSRP at dealership-A and dealership-B is the same. It's obviously illegal price fixing. I want you to court-order one of them to sell me a Lotus at a discount!

xtn

In my example, the people bringing and prosecuting the case decided so. I don't know what basis they used, because it's all hypothetical. It was just something I was thinking about.

[xtn]

Originally Posted by Cardinal

In my example, the people bringing and prosecuting the case decided so. I don't know what basis they used, because it's all hypothetical. It was just something I was thinking about.

Gotcha. It definitely is an interesting topic for thought.

[lotusforsale]

Originally Posted by Cardinal

No, no. I just wanted to know if a charge of price fixing could be used against an industry to get their prices down.

Well, with our government now trying to set compensation for execs in companies that have received no federal dollars for anything, it's not much of a leap to think that the govt won't step in to set prices, or mandate anything else it chooses to.

[Cardinal]

Originally Posted by lotusforsale

Well, with our government now trying to set compensation for execs in companies that have received no federal dollars for anything, it's not much of a leap to think that the govt won't step in to set prices, or mandate anything else it chooses to.

If you have a link to the bolded above, I'd love to see it. I've heard this to be the case, but haven't seen anything for myself.

As far as my price fixing question, here's what inspired it:

Dems go after antitrust exemption for insurers - Yahoo! News

"If enacted, the change would put an end to 'price-fixing, bid-rigging and market allocation in the health and medical malpractice' insurance areas, said Sen. Patrick Leahy, D-Vt., chairman of the Senate Judiciary Committee."

[milehitom]

Originally Posted by lotusforsale

Well, with our government now trying to set compensation for execs in companies that have received no federal dollars for anything, it's not much of a leap to think that the govt won't step in to set prices, or mandate anything else it chooses to.

The "Compensation Czar," Kenneth Feinberg, can only influence compensation for those firms that have accepted federal bail-out funds and not yet paid them back. When they have paid the funds back, they are once again free to pay their employees whatever they want.

Companies who did not take federal bail-out money are under no restriction with regard to compensation. They can still do as they please, their pay scales dampened only by the will of their shareholders (who never exercise any authority anyway).

Tom

[Cardinal]

Originally Posted by milehitom

The "Compensation Czar," Kenneth Feinberg, can only influence compensation for those firms that have accepted federal bail-out funds and not yet paid them back. When they have paid the funds back, they are once again free to pay their employees whatever they want.

Companies who did not take federal bail-out money are under no restriction with regard to compensation. They can still do as they please, their pay scales dampened only by the will of their shareholders (who never exercise any authority anyway).

Tom

Seeing as the money was given out as "no strings attached," (AFAIK) I wonder what will end up happening. I agree with not wanting to use tax dollars to pay execs a boatload of money, seeing as their only accomplishment was wrecking their respective companies.

However, what about this: Is limiting execs' pay to $200K going to damage the company(ies) in the long-run? Can they find someone that has the skills and knowledge to fix the current problems for that kind of money? I really don't know, but I'd like to think that most execs make a crap-load of money for a reason. Thoughts, anyone?

[milehitom]

Originally Posted by Cardinal

Seeing as the money was given out as "no strings attached," (AFAIK) I wonder what will end up happening. I agree with not wanting to use tax dollars to pay execs a boatload of money, seeing as their only accomplishment was wrecking their respective companies.

However, what about this: Is limiting execs' pay to $200K going to damage the company(ies) in the long-run? Can they find someone that has the skills and knowledge to fix the current problems for that kind of money? I really don't know, but I'd like to think that most execs make a crap-load of money for a reason. Thoughts, anyone?

The original four page TARP bill written by Hank Paulson and advanced to Congress is September of 2008 was quickly voted down. When it came back up for a vote on October 3rd, the TARP legislation was 400 pages long and included the controls now being exercised.

A study conducted a few years back by the Wharton School examined the performance of two groups of Fortune 500 companies; 20 companies whose CEOs were the highest-paid (and all of whom came from outside their companies) and 20 whose CEOs were paid less than 500k per year in total compensation (and all of whom had risen through the ranks of their companies. In every instance, the lower-paid CEO-run companies performed better during the survey period.

The myth of superstar CEOs is just that.

But government isn't ever going to cap CEO pay across the board in publicly-held private companies. It's probably not legal, for starters, and it wouldn't fly with us rank-and-file Americans anyway, because we all still harbor that "fairness" gene that says "Hey, maybe that could be me one day" (although statistics say it won't be). Besides, shareholders have power over CEOs (in principle) so it's up to us who own stock to exercise it, so the reasoning goes. In an effort to help us know who's getting paid what at the companies whose stock we own, this July, the House passed a bill that will allow shareholders to have "Say on Pay"-to cast advisory votes on compensation packages and golden parachutes. The Senate hasn't acted on the bill yet. Since shareholders are inherently disorganized and the vote would be non-binding anyway, it wouldn't amount to much if the Senate did pass it, which is unlikely.

25 years ago, the average CEO made 24 times more money than the average American. Today, the average CEO makes 240 times more money than the average American. Not because they're 10 times better, but because they can.

Tom

[Lotus Fury]

Originally Posted by milehitom

Companies who did not take federal bail-out money are under no restriction with regard to compensation. They can still do as they please, their pay scales dampened only by the will of their shareholders (who never exercise any authority anyway). Tom

That's the sticky wicket right there. CEO's aren't held accountable by the shareholders. In mega large modern corporations there are too many shareholders that don't have or really want a voice in the goings on of a company. They just want returns, like mutual and retirement funds. It's why the large corps become inefficient and then either fail or have to buy up their competition. Then when the economy goes bad these large companies should fail or get sold off in pieces - unless an outside entity steps in to stop the natural progression and reward poor management...

[Cardinal]

Originally Posted by milehitom

25 years ago, the average CEO made 24 times more money than the average American. Today, the average CEO makes 240 times more money than the average American.