Sunday, June 27, 2004

Chemical price-fixing Antitrust operations in the US have declines over the past decade, and it seems all but the most outrageous mergers and acquisitions pass muster. One area where antitrust seems to be doing its job is in handling price fixing conspiracies. The latest set of cases, pursued both in the US and in the EU, involve price fixing between chemical companies. Other successes have included vitamins, sweeteners, lysine, and graphite electrodes. It is interesting to note that the collusion in all of these cases affected not the consumer, at least not directly, but another level of business. Is it that business-to-business fraud is easier to detect, or is it that the victims of the price-fixing have as much political and legal clout as the perpetrators? In any case, the discovery of a price-fixing conspiracy is a two-stage process. First, the government fines a guilty company, and then the victim companies can pursue civil suits, almost sure winners once the government case is made. Often the fine is far less significant than the civil settlements. A Wall Street Journal article ("Price-Fixing Investigations Sweep Chemical Industry," 6/22/2004) details the way in which government cases are won, through whistleblowers and through corporate amnesty. Those who come clean to the government receive lighter fines and are less liable to punitive damages in civil cases, in the US often triple damages. The chemical price-fixing, according to the article, involves some of the biggest names in the business: Dow Chemical, DuPont, ExxonMobil, and Bayer Chemical. The area for fixing was in rubber, plastics, and similar products. Among the deals discovered was a conspiracy to hike the price of neoprene, a plastic used in auto manufacture and in electronics. Another area was in the pricing of EPDM, a synthetic rubber. In that case, competitors kept factories running well below capacity and hiked the price based on an artificial shortage. Key companies are now fessing up, in order to get some amnesty protection. Of course, we have no idea how much price-fixing companies get away with, and the fines and damages may just be calculated as an expense of doing business. 9:04:11 PM

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