Just two of the many headlines over reports of the Visy/Amcor cartel price-fixing revelations were "ACCC catches up with cartels" and "Customers held in contempt".
As well as providing a chance to kick a tall poppy, the story has been a bonanza for those who believe business is all about companies getting together to dud customers.
John Durie in The Australian declared the case to be the tip of the iceberg -- "cartel cases are very hard to prove and flourish where there are few competitors."
Something largely absent from the reporting is any analysis of the outcome.
The deal was struck in 2000 and the well-documented meeting between Visy chief Harry Debney and Amcor managing director Peter Brown in September 2002 shows it was not going the way Amcor at least had planned. Here is one reason why. Over the previous two years, a market-sharing agreement had resulted in a shift from near-parity to 51:42 in favour of Visy. As the present decade continued, Visy was to become twice the size of Amcor in the $2 billion market.
This increase in market share was achieved by constant price reductions. Compared with the consumer price index, the price of the basic cardboard box has fallen more than 35 per cent between 1994 and this year. And this trend even accelerated in the years of the agreement.
The trends in price in Australia are not inconsistent with those overseas. In terms of price changes, Australia is in the middle and has experienced rather less price volatility of late than most markets.
While two companies dominate the industry, this does not mean an absence of competition. New Zealand-owned Carter Holt Harvey has a small market share, about 4 per cent, but it is strong in the fastest-growing, high-quality segment of the market. Similarly, there is a rapid growth of imports at the cheapest end of the market for products such as pizza boxes, which are assembled on site.
There is a good deal of antipathy between the two businesses. Part of that may be reflected in the well-reported anti-semitic badinage of two senior Amcor personnel. The antipathy is also manifest in other ways -- the Pratt group has a lock on wastepaper in Australia and refuses to sell to Amcor.
Pratt has admitted wrong-doing -- attending the May 2001 All Nations lunch with his competitor and agreeing to sanction collusive activity. He says he did so with his fingers crossed behind his back and intended the agreement, like the 1939 Nazi-Soviet non-aggression treaty, merely as a staging post in a longer war. He might have many motives for agreeing to the fine. One is that this might avoid an even larger fine and him spending the rest of his active years (Pratt is 72) in sequential court cases fighting a well-resourced regulator hungry for a win after many losses.
Another reason would be to avoid the constant publicity of the Pratt way of doing business, which does not build trust.
This is just one of the upshots for the business. Other forms of punishment vested on Visy include being obliged to appoint former ACCC boss Allan Fels to head its "trade practices compliance committee". But the most visible is the fine -- possibly $40 million, for an imprudent approach to dealing with a competitor is no small beer.
Companies are in business to maximise shareholders' wealth. Monopolies and near-monopolies do so by charging very high prices for their goods and services. But those that face competition -- potential in the case of Microsoft or Google, actual in the case of other strong performers such as Wal-Mart, ComSec and apparently Visy -- need to keep improving their products, cutting costs and searching out new trends if they are to stay on top.
The alternative is to conspire with competitors. But it is difficult to find cases of cartels being created and maintained for any length of time.
Not only does the associated overpricing attract new players, but the cartel members all have different interests, strengths and weaknesses. Marrying these for any length of time has proven to be impossible.
The prime bulwark against high prices is, and must remain, competition. It is legal for cartels or monopolies to be formed in labour markets. What is not and should not be permitted is for these "restraints on trade" to be used to deny alternative providers a chance to supply.
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