“Healthy Competition” and Other Myths

By | April 29, 2023

US companies have paid more than $96 billion since 2000 to settle cartel charges and fines, a US report has revealed. ● Banks and pharmaceutical companies at the forefront of “healthy competition”.

Capitalism is often defined as a system of continuous competition in which prices are determined by supply and demand: producers of goods and services compete with each other to find buyers, each offering the most attractive prices.

These, however, are only true in theory.

In practice, competition is often an empty card. Mainly large companies operating in the same industry, they take advantage of the high market share they have and often enter into backroom deals sharing the market and setting prices themselves. It is the world of cartels, illegal price fixing and other anti-competitive practices secretly concocted by corporate executives who are supposed to be rivals.

In the US alone, where the first antitrust law was enacted in 1890 to counter the growing dominance of the economy by giant trust companies like Standard Oil, the number of detected cartel formation cases since the turn of this century exceeds 2,000 in a wide variety of goods and services, from simple items like packaged ice and shoes to electronic components and medicines.

Companies caught illegally fixing their prices and violating antitrust laws have paid a total of more than $96 billion in fines and settlements since January 2000.

The staggering numbers, which dispel any literature on healthy competition, highlight a recent report (Conspiring Against Competition), conducted by partners at Good Jobs First, a nonprofit think tank focused on corporate responsibility.

The cases studied come from three sources: a. US federal agencies, in particular, the Antitrust Division of the Department of Justice, b. State attorneys general and c. private class shares.

The investigation found that of the previous $96 billion paid to settle cartel charges and fines, more than a third ($33 billion) was paid by banks and investment firms, primarily for fixing cases. illegal benchmark rates such as LIBOR. The industry with the next largest penalties was pharmaceuticals with $11 billion, mostly for cases involving collusion aimed at blocking or delaying the entry to market of cheaper generic drugs that threatened their own branded proprietary formulations.

It is worth noting that antitrust cases rarely go to trial in the US, they are mostly settled. The commitments reached by the companies of the two previous sectors with the federal, state and private authorities cannot be unfortunate, and the fact that in the last fifteen years they have been permanently in the top three with the largest financiers of the pre-election campaigns of the American politicians.

In addition, corporate sectors trapped by price fixing and on the list of fines and settlements include: electronic components ($8.6 billion), auto parts ($5.3 billion), power generation ($5 billion), chemicals ($3.9 billion), healthcare health services ($3.500 million) and cargo services ($3.400 million).

Among companies, credit card giant Visa ($6.2 billion) paid the most, followed by Deutsche Bank ($3.8 billion), Barclays ($3.2 billion), MasterCard ($3.2 billion) and Citigroup ($3.2 billion). 2.7 billion dollars). Outside of the financial sector, the biggest contributors were Teva Pharmaceutical Industries, which together with its subsidiaries paid a total of around $2.6 billion for multiple generic block deal cases. A total of 19 companies or their subsidiaries operating in the US paid at least $1 billion each in settlements and fines.

In addition to the cases of illegal price fixing, the investigation also found 35 cases of secret corporate agreements aimed at the pre-agreed suppression of wages and salaries of workers. Among them, cases were found where employers, such as e.g. poultry processing companies, had agreed to a uniform level of wages but also cases of agreements to exclude workers who had been fired by other companies in the same industry.

Despite the huge sums paid in fines and settlements, price-fixing scandals continue to make headlines on a regular basis. Higher penalties, the report notes, could help reduce cartel formation, but tackling the problem effectively will likely require more aggressive measures aimed at preventing excessive market control by oligopolies.

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