When Companies Rig the Game: Price Fixing and Cartels
Supply and demand sets prices — when the market is fair. But what happens when companies secretly agree to keep prices high? When competitors shake hands behind closed doors and decide together how much to charge you?
It's called price fixing, and it's more common than you think.
What Is Price Fixing?
Price fixing is when competitors agree — secretly — to set prices at a certain level instead of competing. It's illegal in Australia under the Competition and Consumer Act 2010, punishable by fines up to $50 million per offence for corporations.
Real Australian Cases
Cardboard Box Cartel (2017)
Visy Industries and Amcor — Australia's two biggest cardboard manufacturers — secretly agreed to raise prices together. They controlled 90% of the market. Visy was fined $36 million. The ACCC called it "one of the most serious contraventions of the competition laws."
Petrol Price Sharing
The ACCC has investigated fuel retailers for sharing pricing information, which can lead to coordinated price increases. When all petrol stations in an area raise prices on the same day, it might not be coincidence.
Global: The Lysine Cartel
Five companies from the US, Japan, and South Korea secretly fixed the price of lysine (an animal feed additive) in the 1990s. An FBI informant recorded secret meetings. Total fines exceeded $100 million. This became the basis for the film The Informant! (2009).
OPEC: The Legal Cartel
The Organisation of the Petroleum Exporting Countries (OPEC) is essentially a legal cartel. Member countries (Saudi Arabia, UAE, Iran, etc.) meet regularly to decide how much oil to produce — directly controlling global supply and prices.
When OPEC cuts production, petrol prices rise worldwide. Australian families pay more at the pump because of a decision made in Vienna. This is legal because it involves sovereign nations, not companies.
Supermarket Duopoly
In Australia, Coles and Woolworths control approximately 65% of the grocery market (ACCC, 2024). While not technically a cartel, the ACCC has raised concerns about market concentration leading to higher prices and lower competition.
Tonight's Question
"If only two companies sell most of the groceries in Australia, is that really competition? What could change it?"
The Price Comparison Investigation
- Pick 10 common grocery items (milk, bread, eggs, etc.).
- Check prices at Coles, Woolworths, and Aldi (online or in-store).
- Compare: how much do prices differ? Are they suspiciously similar?
- Now check an independent grocer or market. How do their prices compare?
- Discuss: what would happen if a third major supermarket entered Australia?
Go Further
- ACCC: Visit accc.gov.au and look up recent enforcement actions.
- Film: The Informant! (2009) — based on the real lysine price-fixing case.
- Research: What is a "natural monopoly"? Are some monopolies actually better for consumers?
- Question: Should OPEC be considered an illegal cartel? Why do governments allow it?
What We Simplified
- Coles/Woolworths aren't a cartel. Having a duopoly isn't the same as price fixing. They do compete — but less fiercely than in a market with more players.
- OPEC members don't always agree. Cheating on production quotas is common, weakening the cartel's effectiveness.
- Price similarity isn't proof of collusion. In competitive markets, prices often converge naturally.
Sources
- ACCC (2017). "ACCC v Visy Industries." Federal Court of Australia.
- ACCC (2024). "Supermarkets Inquiry." ACCC
- Competition and Consumer Act 2010 (Cth), Part IV.
- Eichenwald, K. (2000). The Informant. Broadway Books.
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