Solingen, Germany For
many years, consumers in Europe may have paid excessive prices for
bananas and pineapples, according to the Brussels-based Common Market
commissioner for trade competition. She recently announced that she
is investigating and likely prosecuting several major wholesalers of
tropical fruit for price fixing: Cincinnati-based Chiquita Brands,
California-based Del Monte and Dole, Noboa of Ecuador, and Fyffes of
Ireland.
The commissioner alleges that those companies secretly agreed with
each other on inflated prices for their products. Last year, Chiquita’s
sales amounted to roughly $4 billion and Del Monte’s to $ 2.8
billion. If the price fixing charges are proven, the violators could
be fined as much as 10 percent of their annual turnover.
Two years ago, the Commission carried out surprise inspections at banana
and pineapple importers in Belgium, Britain, Germany, and Ireland.
The Commission suspected the investigated companies of having “shared
confidential data about volumes and prices” of imported bananas,
for the purpose of setting prices artificially high and carving up
the market among themselves.
The Commission, the European Union's top competition watchdog, is in
the midst of a crackdown on illegal cartels. This year it has already
broken all previous records for fines.
The European banana market has seen troubles before when it became
the center of an international trade dispute over Europe's quota system
that favored producers in former colonies. When Latin American producers
successfully challenged the quotas before the World Trade Organization,
the European Union had to drop its import limits, but it replaced them
with a tariff of 167 euros per ton.
So far, the U.S. Justice Department’s Antitrust Division and
the U.S. Federal Trade Commission have not acted on allegations of
price fixing against tropical fruit wholesalers. In the past, American
law and law enforcement have been much tougher on restraint of trade
than European governments.
Consumers in free market countries expect to reap the benefits of open
competition: the best goods and services at the lowest prices. The
competitive process only works, however, when competitors set prices
honestly and independently. When competitors collude, prices tend to
get inflated and consumers lose the opportunity to bargain.
Since the Sherman Act of 1890, companies doing business in the
U. S. can be criminally prosecuted for price fixing, bid rigging, and
market allocation schemes. To steer clear of allegations of price fixing,
competitors have to avoid even the appearance of agreeing on prices
for their products.
It is not illegal for a firm to copy the price movements of a market
leader, as has occurred, for example, in the market for breakfast cereals.
Under current American law, corporations may be fined up to $100 million
for criminal price fixing. Individuals can be charged and sentenced
to prison sentences of up to 10 years for price-fixing violations.
The Federal Trade Commission can prosecute firms for price fixing as
a civil matter. Private individuals or organizations can bring their
own lawsuits for triple damages for antitrust violations and recover
attorney’s fees.
When price control is sanctioned by a multilateral treaty or is agreed
upon by sovereign nations, as opposed to individual firms, the cartel
may be protected from lawsuits and criminal antitrust prosecution.
This explains why the Organization of Petroleum Exporting Countries
(OPEC) can apparently not be prosecuted under U.S. antitrust law. The
prices of international airline tickets also are fixed by an agreement
with the International Air Transport Association, a practice for which
there is a specific exemption in antitrust law.
In a 5 to 4 ruling on June 28, the U.S. Supreme Court further muddled
the world-wide controversy about the legality of price fixing, when
it allowed manufacturers to set mandatory prices for their products
and forbid retailers from offering discounts, thus overturning a nearly
century-old rule of American antitrust law that prohibited retail price-fixing.
Dissenting from the majority, Justice Stephen Breyer wrote: "The
only safe predictions to make about today's decision are that it will
likely raise the price of goods at retail."