Washington, DC — Large companies operating in the United States have, since the beginning of 2000, paid $96 billion in fines and settlements to resolve allegations of covert price-fixing and related anti-competitive practices in violation of antitrust laws.
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 life-saving medications and electronic components. In industries such as financial services and pharmaceuticals, just about every major corporation (or a subsidiary) has been a defendant, often more than once. Banks, credit card companies and investment firms dominate the top tier, accounting for nine of the 10 most penalized corporations by total dollars.
These are the key findings of Conspiring Against Competition, a report published today by the Corporate Research Project of Good Jobs First, a non-profit research center focused on corporate accountability. The report, available at goodjobsfirst.org, draws on data collected from government agency announcements and court records for inclusion in the Violation Tracker database.
“Large corporations which are supposed to be competing with one another are often secretly conspiring to set prices,” said Philip Mattera, research director of Good Jobs First and author of the report. “In doing so, they cause economic harm to consumers and contribute to inflation.”
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 ($26 billion in penalties)
- 269 cases were brought by state attorneys general ($15 billion)
- 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)
- 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)
- Citigroup ($2.7 billion)
The most heavily penalized non-financial company is Teva Pharmaceutical Industries, which with its subsidiaries has shelled out $2.6 billion in multiple generic-delay cases.
Many of the defendants in price-fixing cases are subsidiaries of foreign-based corporations. They account for 57% of the cases we documented and 49% of the penalty dollars. The country with the largest share of those penalties is the United Kingdom, largely because of big banks such as Barclays (in the interest-rate benchmark cases) and pharmaceutical companies such as GlaxoSmithKline (in generic-delay cases).
Along with alleged conspiracies to raise the prices of goods and services, the report reviews litigation 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. These no-poach agreements inhibit worker mobility and tend to depress pay levels—similar to the effect of non-compete agreements employers often compel workers to sign.
Despite the billions of dollars corporations have paid in fines and settlements, price-fixing scandals continue to emerge on a regular basis, and numerous large corporations have been named in repeated cases.
“Higher penalties could help reduce recidivism,” Mattera said. “But 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.”
Click here for the PDF version of the report.