Major Electronics Vendors Accused of Price Fixing 125
Lucas123 writes "After the DOJ launched an investigation last fall into price fixing by major optical disk drive manufacturers, a home electronics retail store filed a class-action lawsuit this week seeking triple damages for what it is claiming to be long-standing collusion among Sony, Samsung, Toshiba, LG Electronics and Hitachi to raise and fix prices on the drives. The suit claims the vendors used trade organization forums as meeting places to discuss the price fixing. 'These are big Asian smoke-stack industries where they're investing in big fabrication plants. You can't have a technology destroy the business,' said the attorney representing the plaintiff. 'If you fire up a big fab plant with CRT tubes, and the next generation technology destroys it, then you have a big fab plant manufacturing buggy whips. So they have to make sure the price points for these [newer] technologies ... don't destroy existing markets.'"
Re:Is there anything to this? (Score:5, Interesting)
All I see in the story is innuendo; no hint of any actual evidence.
Yeah, I suspect mostly what you're looking at is capacity limitations. Remember when AMD was kicking Intel's ass in CPUs yet never came close to taking over the market? No capacity. So you build a big electronics plant, it's a success but it's only scaled to produce X units/year. To build more you'd have to start building more, which would take so long the market is gone before it is done. Instead you just rise prices, turn a nice profit but the rest of the market still earns good money on old technology. I guess from the outside it can look very much like collusion.
DRAM situation points the other way (Score:4, Interesting)
http://www.theedgesingapore.com/component/content/1312/1312.html?task=view&start=2
"Swayed by cheap loans and soaring DRAM prices in 2005, Taiwan’s DRAM makers went on an expansion spree, building multi-billion dollar fabrication plants (fabs) and amassing a mountain of debt. ... Prices corrected sharply, with benchmark DRAM spot prices tumbling by over two-thirds in 2007. This year, they have continued to fall, nearly halving in value to reach historical lows. Memory chips are now selling at about 50% below the Taiwan makers’ cash costs, according to Citigroup estimates."
If a disaster like this can happen, it points to competition not being a problem at least in the DRAM industry.
Re:No Stereotypes please (Score:2, Interesting)
Stereotypically, everyone hates the Americans for being stupid and hateful and Sterotypically Americans are xenophobes, and yet everyone seems to be doing business with us when it's profitable.
But they don't really hate us; they just dislike us with some odd mixture of contempt and envy. But many Koreans really really hate the Japanese. Something about it not being that many generations ago that the Japanese overran their country and committed terrible war crimes against the civilian population. And I'm not just repeating third-hand stereotypes--I'm speaking from personal experience with Korean friends and their parents.
Price fixing should be allowed, IMO (Score:5, Interesting)
Competition for the lowest price often leads to lower quality. If firms were allowed to agree to prices, then they could focus on competing on quality instead of on price.
The airline industry in the US is a great example. Under regulation, the federal government essentially fixed prices. The airlines then did all they could to provide a higher quality experience to get customers.
The other benefit of price fixing is stability. Firms have a better idea what the future holds in terms of revenue and competition. Without price fixing, firms battle with one another until come firms are forced into bankruptcy or are swallowed up by other firms. Jobs are lost. Again, the same thing happened in the airline industry.
Of course the downside is higher prices. But suppose higher prices make an industry much more profitable than it might otherwise be. Wouldn't that draw in more competitors? Price fixing only works if prices stay low enough that investors don't see opportunity. Considering the huge amount of investment in electronics and the rock bottom prices for all sorts of devices, it looks to me like price fixing hasn't stifled competition or investment.
Re:No Stereotypes please (Score:3, Interesting)
"Stereotypically, everyone hates the Americans for being stupid and hateful and Sterotypically Americans are xenophobes, and yet everyone seems to be doing business with us when it's profitable."
Shit, we killed over a million Vietnamese a few decades back, and now Intel had a chip fab there. Given the overall results, the US got all the capitalist outcomes it wanted, got Viet Nam as a barrier to Chinese expansion (see 'Sino-Vietnamese War"), and did it without winning the war.
Practicality and profit motivate sensible people quite strongly.
Been waiting for a Long Time... (Score:2, Interesting)
You bet prices are fixed. It's one of the things a company earns when it enters the top three. It's a sign of respect. The average slashdotter recoils in horror and thinks, "That's illegal!" Well, is it? If you all meet in China to plan pricing for the West, have you committed a crime? You aren't planning to fix prices in China while you are there.
The other important thing to remember is nearly all markets mature into an oligopoly and then the members of the oligopoly don't want to kill the geese laying the golden eggs.