EC antitrust cops raid offices of Philips, Samsung, others EU antitrust regulators have raided the European offices of Philips, Samsung, retail group Media-Saturn, and several other consumer electronics companies, but so far they're not saying what they were looking for. "The European Commission can confirm that on 3 December 2013, Commission officials initiated unannounced …
"These restrictions, if proven, may lead to higher consumer prices or the unavailability of products through certain online sales channels."
MAY and CERTAIN channels, and is this with or without EURO inflation?
Sounds very vague, I hope this is not about cheap alarm clocks nor going to cost another gadzillion EUR, nor result in 10 pence off and a large payout for lawyers and yurocrats.
I hope that so far, all the expenses are born by the companies allegedly accused of alleged collusion. I also hope that those costs will not be passed on to end customers so that I can sleep easy because I hope that I shall be spared another intempestive action against "gougers" and "speculators" down the line.
I never understand how price fixing works.
Let's say that I can manufacture a McGuffin device and sell it for £5, with all the proper margins and everything, and Contoso, Northwind and Fabrikam are charging £20 for it.
We'll assume here that my McGuffins and their McGuffins are of similar quality.
The other manufacturers would have to find a way to lower their prices to compete, or I would be able to say "These guys are charging £20 for this. I could sell for £15, make more money and still undercut them"
If the latter happened, then the others would likely drop to £15 to match.
In this scenario, which is probably completely different to the one in the article, some would cry "Price fixing!" while others would say "Market effects"
Tesco instore bakery bread is about £1 a loaf. ASDA instore is about £1 a loaf. Hovis charge about £1.20, as do Kingsmill.
Is this a bread price fixing cartel, or just aligning prices to the market?
I'm not an economist, I'm just a reader with an opinion.
I think the problem is more like this:
I can manufacture a McGuffin for £19.93. My three main competitors can manufacture them for £19.94, £19.95 and £19.96.
My McGuffins are fitted to all new Ford cars. My competitors have cornered GM, Toyota and Peugeot/Citroen. And we're all broadly happy with the market share we've got.
So we all decide to charge £160.
In some industries you're right, and price fixing would be near impossible.
The problem comes when it is difficult or expensive to start making and selling McGuffin devices. Would you want to invest millions of pounds in building a McGuffin factory and promoting your brand, only to risk getting put out of business as soon as you start to threaten the established manufacturers?
From a theoretical economic standpoint, "price fixing" is easy to describe. It occurs whenever you have sufficiently small producer segment that they can set prices to garner an economic profit instead of a normal one.
The trouble is, when you get to practical economics, absent government granted monopolies, an economic profit is indistinguishable from a normal profit. So for practical economic purposes "price fixing" is indistinguishable from the market pticing mechanism.
So what we've tended to do is make it a strictly legal problem. It is okay if the only three bakers in a community charge $2.00/£1 for bread so long as they don't talk to each other about setting the price of the bread. But if they all talk to each other and set the price at $1.50/£0.70 that's price fixing and they need to be strung up from the nearest yard arm/tree as is convenient.
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