Agreement of People website

Sign here if you support the campaign for a real democracy


Our blogs


 

AWTW FacebookAWTW Twitter

Your Say


 

 




Rigging markets par for the course

The way Barclays and several other banks colluded to fix inter-bank interest rates is a blatant example of what is actually par for the course in big business. Price fixing, secret agreements to divide markets, cartels and other nefarious goings on are as old as capitalism itself.

How could it be otherwise within a system where the benchmark is the maximisation of profit by any means, fair or foul? Dividend payments to shareholders are based on total profits, which, if they don’t rise year on year, indicate failure. Share prices tend to fall as a result.

So if so-called retail banking doesn’t create enough profits, then use depositors’ money to speculate in a rigged market. Irresistible for Barclays, RBS and the other banks caught in the spotlight.

This kind of underhand activity is not the exception but the rule. Only today, the UK Office of Fair Trading alleged that Mercedes-Benz and five UK dealers of its trucks and vans were involved in price fixing and the sharing of commercially sensitive information between 2007 and 2010.

In April, British Airways agreed to pay a reduced £58.5m fine for colluding with rival Virgin Atlantic on fuel surcharges. BA admitted in 2007 that it had colluded with Virgin over price fixing on long-haul flights between August 2004 and January 2006. OFT’s criminal case
against a number of former BA executives collapsed. Virgin, which blew the whistle on its agreement with BA, was not fined.
 
Last month, the Department of Justice in the United States accused Apple of e-book price fixing. Also in the frame are publishers Penguin and Macmillan. Naturally, the three corporations deny the allegations. Three other publishers immediately settled the action, while admitting no wrongdoing. Observers suspect that fear of Amazon’s ruthless pricing strategy drove rivals to collude to keep prices up.

In late 2007, British consumers discovered that supermarkets and milk suppliers had been illegally rigging the prices of dairy products since 2002. They had colluded to raise the prices of dairy products, and their milk distributors, namely Dairy Crest and Robert Wiseman Dairies, had been the go-betweens for the ostensibly secret pricing decisions. Total cost to consumers was estimated at £270 million. Those involved were fined a total of £116.
 
In 2007, the European Commission undermined a price-fixing scheme among the makers of flat glass, the variety that is used to make windows, doors and mirrors. In 2004 and 2005, four major makers of flat glass – Asahi, Guardian, Pilkington, and Saint-Gobain – secretly met to discuss artificially raising their prices. The industry’s profits soared as a result and the €487 million fine was undoubtedly worth it for the companies which colluded.
 
Other examples you may have missed include £185 million in fines imposed on Dutch brewers, including Heineken and Grolsch, for price fixing. EU competition commissioner Neelie Kroes commented:

It is unacceptable that the major beer suppliers colluded to hike up prices and carve up the market between themselves. The highest management of these companies knew very well that their behaviour was illegal, but they went ahead anyway and tried to cover their tracks.

Previous examples of price fixing include Manchester United and several leading sportswear firms who were found guilty of price fixing on replica football shirts in 2005 and Samsung Electronics who agreed to pay $90m to settle legal action over microchip price-fixing allegations in the US. Three executives went to prison.

So when Labour leader Ed Miliband and others tell us that there can be such a thing as an ethical, “responsible” capitalism they are having a laugh at our expense because it’s an impossible quest. It’s a myth, just like the notion of the “free market”. The system is endemically corrupt. It would actually be easier to replace capitalism with a not-for-profit alternative than clean it up.

Paul Feldman
Communications editor
29 June 2012

Bookmark and Share

Comments now closed

We do not store your name or email details, but may inform you if someone responds to your comment.

If you want weekly update messages please indicate and we will store your details in a secure database which is not shared with any other organisation.

Your name

Your E-mail
(we will not publish your E-mail)

Do you want Updates?

Anti-spam validation:compare< Please enter these letters>

Note: To counter spammers, all comments are moderated.