Quebec gas companies charged

[jdobbin]

http://www.ctv.ca/servlet/ArticleNews/stor...?hub=TopStories

Gasoline retailers in four Quebec regions have been accused of price fixing, the federal Competition Bureau announced Thursday.

The alleged scheme involved 13 people and 11 companies in the Quebec regions of Sherbrooke, Magog, Victoriaville and Thetford Mines, Commissioner of Competition Sheridan Scott told reporters at a Montreal news conference.

So does anyone think this might be happening in their community as well?

[August1991]

So does anyone think this might be happening in their community as well?

Dobbin, it is hard to imagine a market that is more competitive than retail gasoline. Stations all sell the same homogeneous product and advertise their price with signs two meters high. Imagine that you had to look for a wife in such a market.

Rather, this charge is all about politics and I suspect, once taxpayers have forked over all costs of the proceedings and investigations, no one will be charged with anything and no one will pay a fine. IOW, this investigation is entirely for political show.

On the face of it, the idea that gasoline sellers in Thetford Mines could collude to raise prices is simply humourous - they might have exploited the cost to drive to Quebec City to buy gas but that beggars the question. I'd say "Maxime Bernier" is behind this investigation, and its locale.

[jdobbin]

Dobbin, it is hard to imagine a market that is more competitive than retail gasoline. Stations all sell the same homogeneous product and advertise their price with signs two meters high. Imagine that you had to look for a wife in such a market.

Rather, this charge is all about politics and I suspect, once taxpayers have forked over all costs of the proceedings and investigations, no one will be charged with anything and no one will pay a fine. IOW, this investigation is entirely for political show.

You seem quite sure of that. No chance that there was collusion at all to be anti-competitive even with the two year evidence that has been gathered to suggest just that?

[August1991]

You seem quite sure of that. No chance that there was collusion at all to be anti-competitive even with the two year evidence that has been gathered to suggest just that?

All studies of the retail that I have seen conclude that competition is the norm. Simple common sense arrives at the same conclusion.

Imagine that you sold a homogeneous product and advertised your price, to a decimal place, in a 2-meter sign.

Harper is using this investigation in a political way. Chretien would have done the same. In Harper, you Liberals are up against a savvy political player even if the urban Anglophones/Francophones think otherwise.

[jdobbin]

All studies of the retail that I have seen conclude that competition is the norm. Simple common sense arrives at the same conclusion.

Imagine that you sold a homogeneous product and advertised your price, to a decimal place, in a 2-meter sign.

Harper is using this investigation in a political way. Chretien would have done the same. In Harper, you Liberals are up against a savvy political player even if the urban Anglophones/Francophones think otherwise.

So you think no law was broken and the whole thing will be dismissed.

How smart is that of a government operation?

[August1991]

So you think no law was broken and the whole thing will be dismissed.

How smart is that of a government operation?

Politics is politics.

Look where the investigation was instituted.

Edited June 14, 2008 by August1991

[dpwozney]

Speaking of fixing prices, the price of gold is fixed, twice a day by telephone, by five members of the London Bullion Market Association. Gold prices are fixed in the USD, the GBP (or STG), and the EUR.

The price of silver is fixed in CENTS, PENCE, and EUR-CTS, once a day by telephone, by three members of the LBMA.

[Wild Bill]

So you think no law was broken and the whole thing will be dismissed.

How smart is that of a government operation?

The portion of the price that goes to the retailer is "mice nuts", likely maybe .02/litre. I've had some experience in that industry and I would say that the price fixing is not done at the retail level but rather at the wholesaler/refinery level.

Consider, even the independents have to buy their product from the same refineries as the chain logos. If the Shell refinery says that you are going to sell at $1.40/litre then even Ma's Gas Station is going to comply. If she doesn't she won't get any product to sell.

Things can be made even more complicated by using things like volume rebates. This works by having a wholesale price as high or higher than the retail. You buy at $1.42/litre and are expected to sell for $1.38! Your profit comes when the volume of your purchases from the refinery is calculated. If you exceed a certain amount then you get a rebate of .08/litre or whatever. Now you have a profit.

The snag is that some retailers may get better volume rebates than others. If the big boys at the refinery don't like you for breaking ranks with retail pricing...

I'm not saying this is exactly how it is done, just one possible way. There are countless others. We ordinary folks who don't play in that game usually have very naive assumptions of how the business works.

We're supposed to! That's the way the players like it.

[guyser]

Dobbin, it is hard to imagine a market that is more competitive than retail gasoline.

You have got to be kidding me.

An email alert at close to midnite each night, telling the retailers the price, which incidently is the exact same be it PC Sunoco or Esso, is competitive?

[madmax]

You have got to be kidding me.

An email alert at close to midnite each night, telling the retailers the price, which incidently is the exact same be it PC Sunoco or Esso, is competitive?

No competitive is...... lowering the prices and driving out the independents has been the choice weapon of the oligopolies in order to defend their turfs, then raise those prices up after achieving control of the market.

Maybe this isn't working

----------------------------------------------------------------------------

History of Anti-Combines Law

After 1867, local markets extended nationwide

Improved transportation

Increased mechanization

More sophisticated corporate structures

Cartels emerged 1880s – 1890s

Cotton textiles, salt, twine, flour, tobacco

Widespread opposition

Farmers, small business, consumers, labour unions

Anti-Combines Act of 1889

Illegal to conspire to restrict trade, output, or competition

Became a criminal offence in 1892

CHAPTER 9: GOVERNMENT POLICY

History of Anti-Combines Law

Combines Investigation Act (1910)

Application by six people

Judge could order an investigation

People unwilling to bear publicity & expense

No continuous administration of Act

Competition Act (1986)

Focuses on activities that “lessen competition substantially”

Allows mergers that increase efficiency and international competitiveness

Offences are civil rather than criminal, easier to prosecute

Enforced by a competition tribunal made up of judges, lawyers, and business, economic, and consumer experts

[August1991]

The portion of the price that goes to the retailer is "mice nuts", likely maybe .02/litre. I've had some experience in that industry and I would say that the price fixing is not done at the retail level but rather at the wholesaler/refinery level.

Does this matter?

The ultimate buyer in the gasoline trade sees to a decimal place a price 2 meters high. For a 50 litre tank, a one cent difference means 50 cents in filling up or 5 cents on a decimal point. Consumers get that kind of choice. (Bear in mind that the product is homogeneous except for location and loyalty points etc. Most people buy self-serve so service isn't even the issue.) There are no long term contracts or confusing terms.

Keep in mind too WB that it is always better to be outside of a cartel than to be inside one. Conrad Black has been accused of cheating on his partners. The idea of a gasoline cartel is laughable - unless it is government enforced.

La Régie de l’énergie va à l’encontre de l’intérêt des consommateurs en décrétant une augmentation du prix de l’essence dans le marché de Saint-Jérôme, accuse l’Action démocratique du Québec.

La semaine dernière, la Régie a imposé l’ajout de 3 cents par litre au coût d’approvisionnement de tous les détaillants de la région, ce qui a pour conséquence de hausser le prix à la pompe et les profits des commerçants. Elle a donné raison aux détaillants indépendants qui se plaignaient que Costco vend de l’essence à perte, obligeant les autres entreprises à réduire leur marge de profit quasi totalement. La Régie craint la fermeture de détaillants indépendants et une baisse de la concurrence qui désavantagerait les consommateurs.

La Presse

No competitive is...... lowering the prices and driving out the independents has been the choice weapon of the oligopolies in order to defend their turfs, then raise those prices up after achieving control of the market.

That's called "predatory pricing" and to my knowledge, it has never existed in practice.

Madmax, competitive pricing doesn't require government laws or regulation. It relies on the greed of people like Conrad Black. Adam Smith made that observation almost 250 years ago and it's sad that you (and many people like you) don't understand it.

The price mechanism means that we don't need a referee. The bad, greedy guys indirectly work for the common good - even if that's not their intention.

Edited July 22, 2008 by August1991

[Smallc]

That's called "predatory pricing" and to my knowledge, it has never existed in practice.

Your kidding right? It happens all of the time, because company owned stations don't need the added margin of independents. Add to that the fact that companies arbitrarily seem to charge different prices to different filling station and you have a real problem. I know this first hand.

[August1991]

Your kidding right? It happens all of the time...

Give me an example. I've looked at many - that weren't.

If I have 90% of a market and you have 10%, when I lower the price, I lose $9 for every $1 that you lose. In fact, my losses are worse. You can go to sleep and threaten me, the big guy. It's called a contestable market.

[madmax]

Give me an example. I've looked at many - that weren't.

[August1991]

Huh?

[Smallc]

Give me an example. I've looked at many - that weren't.

If I have 90% of a market and you have 10%, when I lower the price, I lose $9 for every $1 that you lose. In fact, my losses are worse. You can go to sleep and threaten me, the big guy. It's called a contestable market.

Company owned tores can sell at zero or even negative profit. They have already made money off of the gasoline at every step and all they have to do is unload it. They don't need to charge the extra few cents that the independents do. The independents must lower their prices to match and lose money while the oil companies don't care because they've already made their money.

Also, the companies set the prices and charge different stores different prices, and often it is quite arbitrary.

[August1991]

Company owned tores can sell at zero or even negative profit. They have already made money off of the gasoline at every step and all they have to do is unload it. They don't need to charge the extra few cents that the independents do. The independents must lower their prices to match and lose money while the oil companies don't care because they've already made their money.

But every day, a large retailer who dominates a market will lose more than a small retailer.

And then what? When the greedy big retailer (finally a monopoly) decides to raise prices (and finally benefit from all those losses), the small greedy guy jumps in and takes advantage of the big guy's "work".

(BTW, this isn't about the small guy and his profits - although he gets them. It's about how the price mechanism and greedy people benefit the rest of us.)

Edited July 23, 2008 by August1991

[Smallc]

(BTW, this isn't about the small guy and his profits - although he gets them. It's about how the price mechanism and greedy people benefit the rest of us.)

I would guess that in many competitive markets, the small guy makes his money on things other than gas and is in fact selling gas at cost or below.

[eyeball]

Keep in mind too WB that it is always better to be outside of a cartel than to be inside one. Conrad Black has been accused of cheating on his partners. The idea of a gasoline cartel is laughable - unless it is government enforced.

So why should such a vital public need as the distribution and sale of energy, especially from publicly owned natural resources be left to the private sector? This should be a public service performed by the government - a social co-operative enterprise that makes us all equal partners. Yes I've heard all the public vs private yadda yadda about efficiency and innovation but I just can't buy the argument that these can't be encouraged just as readily in the public sector by the same sort of incentives the private offers. The problem is that top down organizational structures function in a manner that acts to suppress individual initiative. The problem is at the top of the stucture which is a fortunate thing because it makes it far easier to deal with.

Its interesting that you should mention Conrad Black's greed. He was not only accused of cheating on his partners he was found guilty, based largely on the video evidence offered by surveillance cameras. The lesson of Conrad Black should be crystal clear.

The biggest impediment to innovation and efficiency in public sector enterprises is a lack of accountability and transparency and a entrenched culture of secrecy that starts at the top. This is a stifling malignancy that oozes down and smothers everything below it. By the same token, total public awareness of the management, a bottom up driven organization in other words, should cause accountability and transparency not to mention honesty and decency trickle down through the rest. Just like wealth is supposed to.

Financial compensation should be based on the amount of transparency managers and CEO's bring to an organization. If my job required I had a camera up my ass I'd insist on a very high level of pay too.

Perhaps a anti-Orwellian world in which the tables and cameras are turned and Big Brother is the subject of our scrutiny instead would be just as dystopian as Winston Smith's but I bet Smith would still be willing to give it a try.

[eyeball]

--

Edited July 23, 2008 by eyeball

[August1991]

So why should such a vital public need as the distribution and sale of energy, especially from publicly owned natural resources be left to the private sector? This should be a public service performed by the government - a social co-operative enterprise that makes us all equal partners.

That's a very curious worldview: that vital public needs should be left to the government.

Eyeball, I think that you have fallen victim to one of the biggest propaganda schemes in a century or two. Government is big and powerful and we can't function without it. Several centuries ago, the Catholic Church used similar techniques.

Look, the government is a useful institution but it is hardly the best institution for the distribution and sale of energy. If you stop and think about the most critical or vital needs in your life, it's your family or friends that provide them. For food and shelter, we largely rely on private, anonymous markets.

The Soviet Union is good evidence that government is a lousy way to organize things.

Yes I've heard all the public vs private yadda yadda about efficiency and innovation but I just can't buy the argument that these can't be encouraged just as readily in the public sector by the same sort of incentives the private offers. The problem is that top down organizational structures function in a manner that acts to suppress individual initiative. The problem is at the top of the stucture which is a fortunate thing because it makes it far easier to deal with.

This isn't about innovation or organization as such.

By their nature, governments cannot provide choice. The best way to innovate, be efficient, organize well, yadda, yadda is to let people choose.

In general, a public (government) solution is a monopoly of one form or another. There is no choice. A private solution means usually that there is at least one or two alternatives. If you don't like Company A, you can go to Company B. That little bit of choice keeps them sort of honest and makes you a little better off. And then maybe, they'll have an incentive to innovate or organize well.

You know what they say: You can't choose your family but you can choose your friends. It's kind of the same thing here.

Edited July 24, 2008 by August1991

[eyeball]

Eyeball, I think that you have fallen victim to one of the biggest propaganda schemes in a century or two. Several centuries ago, the Catholic Church used similar techniques.

Several centuries ago people believed the excess and abuses of power would be checked by God. The fear that kings and lords (like Conrad Black for example) had of being watched and judged, would protect ordinary people from their self-serving depredations or so it was supposed. Even to this day politicians are still warned that their immortal souls are in peril if they step out of line.

Nowadays we have the technical ability to actually monitor people who are in power. I'm not a religous person but assumimg I was I'd say that God works through us and helps those who help themselves. The effect of us watching and judging powerful people should be the same, just go ask Conrad Black if you don't believe me.

I'm not a victim of anything but my own faith in the idea of government, law and order. I have no faith whatsoever in the ability of human beings to withstand being exposed to wealth and power. These people need to be monitored for their protection as well as ours.

Edited July 24, 2008 by eyeball

[eyeball]

(Please oh God don't let the politicians blow the $4.25 billion on themselves or more stuff nobody wants... )

Please oh who?

Perhaps we could spend the Spectrum windfall on GOD - Government Observation Devices.

[madmax]

And then what? When the greedy big retailer (finally a monopoly) decides to raise prices (and finally benefit from all those losses), the small greedy guy jumps in and takes advantage of the big guy's "work".

You have proof of this? Are you a wholesaler for the distribution of fuels.

How many wholesalers are in Ontario setting up indepentdent fuel outlets?

[August1991]

You have proof of this? Are you a wholesaler for the distribution of fuels.

How many wholesalers are in Ontario setting up indepentdent fuel outlets?

Here's one randomly chosen study:

Allegations of predatory pricing by large refiners have been made repeatedly by dealers' representatives, who have advocated retail divorcement as a solution. The states of Maryland and Connecticut and the District of Columbia have passed strong divorcement laws, while a host of other state legislatures have considered such laws. Using a special set of price data on refiner-operated stations, and on their competitors in Maryland, this paper tests the hypothesis that refiners have preyed on dealers. The findings, which do not support the hypothesis, deny the validity of the predatory-pricing allegations.

Link

I prefer the common sense argument that if I hold 90% of the market I want you out, I lose $9 for every $1 that you lose.

Underneath this example is the more profound idea that markets are not like battlefields. In a battle or fight, the strong guy wins. In a market with a price, two or more people fight about a number and people outside of the fight (observers, customers) benefit.

IOW, this whole idea of "predators" misses entirely the point. A better analogy is two knights fighting for a damsel - assuming the best man wins, in the damsel's view.