Price Fixing Scandal for LCD Monitors

[Michael Hardner]

link

ALBANY, N.Y. — New York Attorney General Eric Schneiderman says seven companies will pay $553 million to settle allegations they inflated prices for liquid crystal display screens used in televisions and computer monitors.

The corporations Chi Mei Innolux Corp., Chunghwa Picture Tubes Ltd., Epson Imaging Devices Corp., HannStar Display Corp., Hitachi Displays Ltd., Samsung Electronics Co. Ltd. and Sharp Corp. along with U.S. affiliates are settling antitrust claims brought by eight state attorneys general and private class-action attorneys.

I guess we can't count on corporations to act in our best interest all the time. The Invisible Hand imagery doesn't work perfectly when applied to giant corporations.

[Shady]

link

I guess we can't count on corporations to act in our best interest all the time.

Who ever said we could? Who ever said we could count on anyone acting in anyone's best interest ALL THE TIME? That's an interesting premise you have there.

[Bryan]

Where are these inflated prices? Prices have been dropping like crazy for TVs and monitors.

[TimG]

I guess we can't count on corporations to act in our best interest all the time. The Invisible Hand imagery doesn't work perfectly when applied to giant corporations.

The story that does not get reported is how difficult it is to make these marvels of engineering which we take for granted. There are hundreds, if not thousands, of critical patents on the manufacturing process which are cross licensed between rivals. This makes collusion inevitable since one persons "price fixing" is another persons "patent license". It also ensures that no upstart has any chance to get into the business. I don't have any solution for the numerous issues that are raised here.

[punked]

Who ever said we could? Who ever said we could count on anyone acting in anyone's best interest ALL THE TIME? That's an interesting premise you have there.

You Shady you are the one who says this stuff all the time. You talk about how government regulators who police this thing to make sure people don't get ripped off are useless and how they always get in the way. How the market forces will fix it and bla blah blah. You are the one who insinuates this stuff all the time.

[Michael Hardner]

Who ever said we could? Who ever said we could count on anyone acting in anyone's best interest ALL THE TIME? That's an interesting premise you have there.

August1991 comes to mind who uses the terms "choice" and "consumer choice" interchangeably.

[MiddleClassCentrist]

It doesn't surprise me that Shady comes in to question the validity of the argument against price fixing.

[fellowtraveller]

this thread puzzld me since the prices of LCD equipment has plummetted, until I noteiced in the link that the time period covered is 1999-2006

[cybercoma]

link

I guess we can't count on corporations to act in our best interest all the time. The Invisible Hand imagery doesn't work perfectly when applied to giant corporations.

It doesn't work at all. Over 7 corporations had to pay $553 Million in this settlement. That's less than $79 Million per company. How long had this been going on? How much extra did they make? When it comes to a large corporation, this will merely be a cost of doing business. A quick Google search shows that Sharp, for instance, saw an increase in its profits during its 2010-11 fiscal year of $237 Million. In one year, their increase in profits is 3x the penalty. If I knew of a way to illegal procure some amount of money and knew that my punishment would be 1/3 of what I could get, I would be a fool not to engage in illegal activities. A 3x return on investment is a pretty sweet deal.

[Guest Manny]

It doesn't work at all. Over 7 corporations had to pay $553 Million in this settlement. That's less than $79 Million per company. How long had this been going on? How much extra did they make? When it comes to a large corporation, this will merely be a cost of doing business. A quick Google search shows that Sharp, for instance, saw an increase in its profits during its 2010-11 fiscal year of $237 Million. In one year, their increase in profits is 3x the penalty. If I knew of a way to illegal procure some amount of money and knew that my punishment would be 1/3 of what I could get, I would be a fool not to engage in illegal activities. A 3x return on investment is a pretty sweet deal.

Agreed. But what is never considered and now comes to view is the loss of consumer confidence that stories like these create. The more they screw people, and the more we know about it, the more widespread and deeper the problem becomes. Allahu akbhar

[August1991]

But what is never considered and now comes to view is the loss of consumer confidence that stories like these create. The more they screw people, and the more we know about it, the more widespread and deeper the problem becomes. Allahu akbhar

WTF?

Only in the US...

The companies denied responsibility and said in the pact that they settled to avoid the expense of protracted litigation. But Schneiderman declared victory.

"This price-fixing scheme manipulated the playing field for businesses that abide by the rules and left consumers to pay artificially higher costs for televisions, computers and other electronics," Schneiderman said.

There are LED, LCD and Plasma screens (and even the old CRTs), and people say that collusion limits our choices.

Frankly, I would rather live in a world of private collusion with LCDs rather than live in a world of government regulators prosecuting so-called private collusion without LCDs.

[TimG]

Frankly, I would rather live in a world of private collusion with LCDs rather than live in a world of government regulators prosecuting so-called private collusion without LCDs.

I find it interesting that no one bother to respond to my post where I pointed out that cross licensing of patents which is essential for competition will give the appearance of collusion even when there is none.

[August1991]

I find it interesting that no one bother to respond to my post where I pointed out that cross licensing of patents which is essential for competition will give the appearance of collusion even when there is none.

I think rather that cross licensing of patents is evidence of collusion, but I just don't care.

I fear State monopolies far more than any private collusion scheme.

How long did it take Fed-Ex (and email) to compete with the Post Office? How long did it take plasma screens to compete with CRTs? As long as their collusion is not State-enforced, I'll let these guys make monopoly profits and use the money to innovate.

-----

Hilarious. We have a wheat board, egg marketing board, milk marketing board, health/education ministries and various public/private sector unions. They are all State-sanctioned monopolies.

And the OP is worried about a supposed cartel in a sector of changing technology.

Price fixing?

In Canada, who fixes the price of a teacher? Or a litre of milk?

Edited December 29, 2011 by August1991

[Michael Hardner]

So you're NOT against price fixing ? You just don't like government.

"I don't care who robs me as long as he's not working for the government."

Ok, nothing really to add to that.

[Bonam]

Err, it's not "robbery", obviously, since no one is forcing you to buy anything you don't want. That being said, price collusion should certainly be investigated and cracked down on when it occurs, and it looks like that's what happened here. The efficiency of the free market is based on competition, not monopolies, and preventing monopolization of the market by a company or group of companies is one of the valid roles of government in a free market system. Since the companies got fined for their infraction, it seems to me like the system is working. The amount of the fine was negotiated and the prosecutors obviously agreed to it, so they must have felt that the fine was appropriate for the situation. Regardless, it should be noted that the price of this technology has been dropping quickly despite the alleged collusion, including in the period 1999-2006.

Edited December 29, 2011 by Bonam

[Michael Hardner]

I wasn't being literal - I was trying to point out an anomaly in August's logic. "Robbed" "Ripped off" and such words are colloquial ways of saying that someone is being treated unfairly and the point was that the poster felt differently about such treatment based on who was doing it.

[TimG]

The efficiency of the free market is based on competition, not monopolies, and preventing monopolization of the market by a company or group of companies is one of the valid roles of government in a free market system.

A value which goes completely against the prinipals of patents which deliberately create monopolies in order to spur innovation. You cannot have patents without collusion.

[cybercoma]

A value which goes completely against the prinipals of patents which deliberately create monopolies in order to spur innovation. You cannot have patents without collusion.

Paying for a patent is nothing more than another input into the creation of a product. Saying collusion is inevitable because they have to pay patent fees is like saying that price collusion is inevitable because they need to buy copper wire.

[TimG]

Paying for a patent is nothing more than another input into the creation of a product. Saying collusion is inevitable because they have to pay patent fees is like saying that price collusion is inevitable because they need to buy copper wire.

Then you don't understand what patents are. Patents are a system where a single entity is granted a MONOPOLY on an innovation. This is equivalent to buying copper in world where a single company owns all of the copper wire production facilities and has a right to force all competition out of business.

When large companies create complex technology based products they have no choice but to collude by cross licensing each others patent portfolios. Google recently bought Motorola in order to force Apple to the table so they can negotiate a patent deal price fixing scheme.

[Michael Hardner]

Then you don't understand what patents are. Patents are a system where a single entity is granted a MONOPOLY on an innovation.

It's an interesting idea, but calling it a monopoly is a stretch. Patents reward innovation by providing limited term protection for new technologies.

[TimG]

It's an interesting idea, but calling it a monopoly is a stretch.

Please explain why the exclusive right to use a technology is not a monopoly.

[cybercoma]

Because others can use the technology if they pay to license it from the patent holder.

[TimG]

Because others can use the technology if they pay to license it from the patent holder.

The point you are missing is the patent holder has a MONOPOLY over the technology and is free to decide who can license it and at what cost. The only way around the monopoly is to not use the technology which is impossible to do for many products. The net result is the big players must collude in order to ensure they can operate. Edited December 29, 2011 by TimG

[Wild Bill]

I spent my career in the electronics industry so I have some experience and perspective to offer.

Yes, quite often price fixing appears to happen. I say appears because it is not always true price fixing. Sometimes with a new device of high technology there are patent and cross-technology agreements that must be paid. These can add to the price of the device and actually swamp out costs of materials and production. This means prices after distribution costs are factored in can end up similar.

Or, it can be an out and out price fixing scheme but this is very rare. The more manufacturers involved the more unlikely it becomes, as most companies are reluctant to run the risk of charges. To have as many as are named in this lawsuit seems incredible to me but I suppose its possible!

There's another possibility. Remember that this springs from the USA, the land where you can sue and get millions for dumping a McDonalds hot coffee into your lap! How common is it for lawyers to have any sort of the technical knowledge involved in making such displays? How many lawyers can put a new plug on a lamp?

I know for a fact that such knowledge in government agencies is virtually unknown. I make my living building and servicing guitar amplifiers, mostly those based on old-fashioned vacuum tube technology. The circuits involved with such have been public domain for decades, yet a peculiar situation has developed in the market.

A small "boutique" maker of guitar amps will design and build an amplifier that uses circuits that date back to the 1930's and 40's. One day he's shocked to get a letter from a very large manufacturer, whom I shall not name. It will be from their lawyers, claiming patent infringement and threatening to sue unless he stops production immediately!

How can this be, one might ask? How can there be a new patent on a circuit using obsolete technology? The answer is that the US Patent Office does NOT screen new applications any longer! It costs money to do that. So the big bully company submits an application which is just something cribbed from a 50 year old design and the patent office rubber stamps it!

From the patent office's perspective, they don't want to waste their time and money. Besides, if it is truly bogus a court of law should easily be able to sort it out!

This is true in theory but not in reality. The little boutique manufacture simply can't afford the sort of lawyers hired by the much bigger company! He is completely in the right but since he is outclassed by money he has to "cave" and stop producing his product.

So in technical areas we can't always trust the government.

Now lets move our viewpoint to modern times. A lawyer can make a great name for himself taking on large corporations and winning! What's more, he doesn't have to convince a judge on the technical merits. The judge would never understand them anyway! No, all he has to do is put up enough smoke that to such a judge it appears there must be a fire and he'll win!

Lawyers for American government departments have done this many times before in the electronics industry. Microsoft has been sued for being a monopoly. Intel and others also.

I am NOT saying price fixing never happens! I'm just pointing out that we can't always believe the government lawyers either. BOTH sides can be guilty of having an agenda!

Consider what happened to Conrad Black. There are some grievous questions about his actual guilt but even more, his punishment seems far harsher than that given to many other rich men convicted of similar "white collar" crime.

If you look behind the scenes you will find the prosecuting lawyers often seemed driven to "take down a rich bastard!" They ended up with enhanced professional reputations by taking advantage of the popular view that "a rich guy like him may not be guilty of THIS crime but he must be guilty of enough other stuff so who cares? How else could he have gotten so rich if he wasn't crooked?"

So with this case I don't see how we at our level can possibly tell who's truly guilty or not! From my perspective, either side or even both could be acting under false pretenses.

[August1991]

So you're NOT against price fixing ? You just don't like government.

No MH, I am not opposed to government. I am opposed to "government price fixing".

If you asked for my political theory, it would be this: co-operation is far better than competition. When co-operation is not feasible, then the State should force us to co-operate.

Government price fixing is an abuse of State power.

----

Milk, egg and other agricultural marketing boards, the CRTC, public/private sector unions, rent control and minimum wage laws are examples of State-sanctioned cartels. They are examples of "legal" price-fixing.

If price-fixing is the issue, then I would not worry about so-called private collusion in LCD screens or even retail gasoline sales - as long as it does not involve government sanction.

We should only use the power of the State when other forms of co-operation are not possible.

Like fire, government is a useful servant but a terrifying master. I fear the abuse of State power.

Edited December 31, 2011 by August1991