223
See also: Play by the rules 120–23 ■ Profit before perks 124–25 ■ Morality in
business 222 ■ Creating an ethical culture 224–27I
n a market economy,
companies are in commercial
competition with one another.
It is illegal for them to “collude”
to fix prices or make secret trade
agreements. However, collusion and
collaboration are close relatives, and
sometimes companies argue that
the way in which they “work
together” does not constitute
collusion. Rival companies have
been known to “collaborate” in
order to gain advantage over other
competitors, or to increase profit.
They might do this by sharing
restricted information, limiting
the supply of goods to influence the
price, or fixing prices. Two airlines
hit the media in 2007 when they
were accused of price-fixing. Staff
at British Airways had tipped off
staff at competitor Virgin Atlantic
over fuel surcharges. British
Airways admitted to collusion, and
was fined $195.5 (£121.5) million.Accountability
Individuals in large organizations
sometimes consider themselves
infallible. In the mid-1990s, fivebusinesses in the US, Korea, and
Japan secretly colluded to raise
the price of lysine (an ingredient in
animal feed) above its average price
in the international market. Within
nine months the illegal cartel had
raised prices by 70 percent. Gains
for the companies and individuals
would have been significant if they
had not been caught. Several
executives went to prison and US
company, Archer Daniels paid the
largest antitrust fine in US history. ■WORKING WITH A VISION
T H E R E I S N O S U C H
T H I N G A S A M I N O R
LAPSE IN INTEGRITY
COLLUSION
IN CONTEXT
FOCUS
Ethics of competition
KEY DATES
11th century Legislation in
England outlaws monopolies
and restrictive practices.
13th century King
Wenceslaus II of Bohemia
passes a law to prohibit
iron-ore traders from working
together to increase prices.
1790s After the French
Revolution, agreements by
members of the same trade
to fix prices are declared
void, unconstitutional, and
“hostile to liberty.”
1890s The Sherman Act in
the US makes it illegal for large
companies to cooperate with
rivals to fix their outputs,
prices, or market shares.
2000s The Treaty of Lisbon
prohibits anticompetitive
agreements, including price-
fixing, in the European Union.
We have always known that
heedless self-interest was bad
morals; we now know that
it is bad economics.
Franklin D. Roosevelt
US former President (1882– 45)