As working-class households continue to struggle amid a cost-of-living crisis driven largely by corporate profiteering, a new investigation shows that large companies operating in the United States have paid nearly $100 billion in fines and settlements since 2000 "to resolve allegations of covert price-fixing and other anti-competitive practices in violation of antitrust laws."
Conspiring Against Competition: Illegal Corporate Price-Fixing in the U.S. Economy, a report published Monday by the Corporate Research Project of Good Jobs First, is based on an analysis of government agency announcements and court records included in the nonprofit's Violation Tracker database.
"Putting a real dent in price-fixing will probably require aggressive steps to deal with the underlying structural reality that makes it more likely to occur: excessive market concentration."
"Capitalism is typically portrayed as a system of constant competition in which prices are determined by supply and demand. Producers of goods and services are said to constantly vie with one another in the quest for sales," says the report. "In truth, however, large companies often evade competition and instead collude with one another to control markets to their mutual benefit—and to the disadvantage of consumers, who end up paying higher prices. This is the world of price-fixing and other anti-competitive practices cooked up secretly by purportedly rival corporate executives."
"Illegal pricing conspiracies have occurred in a wide range of industries, affecting the cost of products ranging from everyday grocery items and auto parts to chemicals and electronic components," the report notes. "In industries such as financial services and pharmaceuticals, just about every major corporation (or a subsidiary) has been a defendant in one or more cases. Banks, credit card companies, and investment firms dominate the top tier, accounting for 9 of the 10 most penalized corporations by total dollars."
In a statement, Good Jobs First research director and report author Philip Mattera said that "large corporations which are supposed to be competing with one another are often secretly conspiring to set prices."
"In doing so," Materra continued, "they cause economic harm to consumers and contribute to inflation."
According to the report:
Of the more than 2,000 cases in which companies made payments to resolve civil and criminal price-fixing allegations, 357 were brought by the Antitrust Division of the U.S. Justice Department and other federal regulators. Those yielded $26 billion in penalties. Another 269 cases were brought by state attorneys general ($15 billion); and 1,407 class action lawsuits were initiated by private plaintiffs ($55 billion).
Of the $96 billion in penalties, over one-third ($33 billion) was paid by banks and investment firms, mainly to resolve claims that they schemed to rig interest-rate benchmarks such as LIBOR. The second most penalized industry, at $11 billion, is pharmaceuticals, due largely to owners of brand-name drugs accused of illegally conspiring to block the introduction of lower-cost generic alternatives.
Price-fixing happens most frequently in business-to-business transactions, though the higher costs are often passed on to consumers. Apart from finance and pharmaceuticals, the industries high on the penalty list include: electronic components ($8.6 billion in penalties), automotive parts ($5.3 billion), power generation ($5 billion), chemicals ($3.9 billion), healthcare services ($3.5 billion), and freight services ($3.4 billion). Information technology's total is relatively low, at $1.7 billion, apparently reflecting that industry's heavy reliance on advertising rather than revenue from users.
Nineteen companies (or their subsidiaries) paid $1 billion or more each in price-fixing penalties. At the top of this list are Visa Inc. ($6.2 billion), Deutsche Bank ($3.8 billion), Barclays ($3.2 billion), MasterCard ($3.2 billion), and Citigroup ($2.7 billion). The most heavily penalized nonfinancial company is Teva Pharmaceutical Industries, which with its subsidiaries has shelled out $2.6 billion in multiple generic-delay cases.
As the report notes, foreign-based corporations were defendants in 57% of the price-fixing cases examined, and they paid 49% of the penalty money.
In addition to alleged conspiracies to increase the prices of goods and services, Good Jobs First found "about three dozen cases involving schemes to depress wages or salaries."
"These include cases in which employers such as poultry processors were accused of colluding to fix wage rates as well as ones in which companies entered into agreements not to hire people who were working for each other," the report notes. "These no-poach agreements inhibit worker mobility and tend to depress pay levels—similar to the effect of noncompete agreements employers often compel workers to sign."
"Despite the billions of dollars corporations have paid in fines and settlements," the report adds, "price-fixing scandals continue to emerge on a regular basis, and numerous large corporations have been named in repeated cases."
In November, Federal Trade Commission (FTC) Chair Lina Khan led the agency in issuing a new policy statement restoring its commitment to "rigorously enforcing" the FTC Act's prohibition on "unfair methods of competition," including what critics have called "predatory pricing."
"Oligopolies are not just a cause of inflation. They exacerbate social and economic inequality, and thus weaken democracy."
On Tuesday, Materra said that "higher penalties could help reduce recidivism."
"But putting a real dent in price-fixing," he argued, "will probably require aggressive steps to deal with the underlying structural reality that makes it more likely to occur: excessive market concentration."
Since the start of the Covid-19 pandemic and Russia's invasion of Ukraine disrupted international supply chains—rendered fragile by decades of neoliberal globalization—corporations fortified by preceding rounds of consolidation have capitalized on these and other crises to justify price hikes that far outpace the increased costs of doing business.
Progressives have long urged the Biden administration and Congress to strengthen antitrust enforcement, enact a windfall profits tax, and impose temporary price controls, contending that only these measures—and not the Federal Reserve's job- and wage-destroying interest rate hikes—can dilute the power of price-gouging corporations and ensure the affordability of food, medicine, and other necessities.
"When a small number of companies dominate an industry, collusion is easier," the new report concludes. "Oligopolies are not just a cause of inflation. They exacerbate social and economic inequality, and thus weaken democracy. Curbing their power will not only address price-fixing but also move us closer to a just society."