Britain's supermarkets and dairy groups have been fined £116m by the Office of Fair Trading, after admitting fixing the prices of milk, butter and cheese.
The Guardian reported that the OFT has levied large fines - on behalf of consumers - to various businesses that have been deemed to have artificially raised the price of dairy products. This case is fascinating for two main reasons:
- The defendants claim that they were charging above market prices to pass through the supply chain. Notice that this is similar - in terms of expressed intentions - to the principle of Fairtrade certification. If collusion is "artificially" raising prices, how do we distinguish between these various forms?
- Notice how long it's taken for regulatory action, and contrast this to the speed at which companies suffer losses when they genuinely upset customers. For example, when two separate recalls of Mattel toys prompted investors to knock $2.75bn off the value of the company within about 5 months (see Mark Perry)
Those two discussion points are open issues - I've only caught a few whiffs of this issue, but haven't seen these points being made elsewhere.
Also. I've recently submitted a policy paper to the Competition Commission regarding their groceries investigation. It's called "Are Tesco acting competitively?"(.pdf). There seems to be two main ways to dismiss this paper: (i) claim that i'm in the pocket of big business and acting in my self-interest; (ii) view my economic analysis as faulty. The former should be dismissed out of hand given that I've never received a penny from Tesco (and indeed I currently refuse to shop there), especially given the nature of the majority of submissions. These "consumer" concerns are special interests, seeking to use the regulatory authorities to curtail a more efficient rival. My paper is a completely impartial economic analysis. The latter - whether that analysis is faulty - is open to debate. But please, take a look at the paper before deciding whether you agree with it.