How the market economy works

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5 December 2012

As it does from time to time, Antigone1984  today draws readers’ attention to the latest example, hot from the press,  of how capitalism is working.


In this post we supply a juicy instance from behind the scenes in the shady world of global electronics. This concerns price-fixing and market-rigging on a gigantic scale not by small fly-by-night hole-in-the-wall micro-businesses but by some of the most prominent corporate names in international consumer electronics: Philips of the Netherlands; L G Electronics and  Samsung of South Korea; Toshiba and Pansonic of Japan; Technicolor of France; and Chungwa of Taiwan. For almost a decade these companies colluded as members of one or two cartels to manipulate electronics markets to the detriment of consumers. The European Commission has just hit them with a record antitrust fine totaling nearly 1.5 billion euros ( nearly 2 billion dollars or 1.2 billion pounds sterling). Chungwa escaped the fine as it was the company that blew the whistle on the price-fixing. Strategy aimed at rigging the market was sometimes decided at top-level “green meetings”, so called because participants often followed up their illegal plotting with a round of golf. The European Commission fine aside, the companies now face court action for redress from consumers harmed by the operation of the cartels.


Antigone1984: The capitalist economy, which prevails today throughout the world, is based on the theory that firms compete with one another so as to provide the best price for the consumer. The reality is otherwise. Companies do their utmost to achieve monopoly control of a market. If they cannot do that, they will try to form cartels with each other to share out the market between them against the interests of the consumer. What should happen and what does happen are two different things. However, the corporate electronics giants which have now been fined broke one cardinal rule of business – they got caught out! In the amoral world of international capitalism that is the one principle that must be observed at all times.


Thank goodness for the market economy! Where would we be without it!? Almost certainly suffering from some kind of major economic crisis. Come to think of it……

The following is the essential part of a press release issued in Brussels today 5 December 2012 by the European Commission. We have highlighted certain passages and figures in bold. The text is long but we believe it will repay careful study. A few inessential details have been removed.


Brussels, 5 December 2012

Antitrust: Commission fines producers of TV and computer monitor tubes  1.47 billion euros for two decade-long cartels

The European Commission has fined seven international groups of companies a total of € 1 470 515 000 for participating in either one or both of two distinct cartels in the sector of cathode ray tubes (“CRT”). For almost ten years, between 1996 and 2006, these companies fixed prices, shared markets, allocated customers between themselves and restricted their output. One cartel concerned colour picture tubes used for televisions and the other one colour display tubes used in computer monitors. The cartels operated worldwide. The infringements found by the Commission therefore cover the entire European Economic Area (EEA). Chunghwa, LG Electronics, Philips and Samsung SDI participated in both cartels, while Panasonic, Toshiba, MTPD (currently a Panasonic subsidiary) and Technicolor (formerly Thomson) participated only in the cartel for television tubes.

Chunghwa received full immunity from fines under the Commission’s 2006 Leniency Notice for the two cartels, as it was the first to reveal their existence to the Commission. Other companies received reductions of their fines for their cooperation in the investigation under the Commission’s leniency programme.

Commission Vice President in charge of competition policy Joaquín Almunia said:

“These cartels for cathode ray tubes are ‘textbook cartels’: they feature all the worst kinds of anticompetitive behaviour that are strictly forbidden to companies doing business in Europe. Cathode ray tubes were a very important component in the making of television and computer screens. They accounted for 50 to 70% of the price of a screen. This gives an indication of the serious harm this illegal behaviour has caused both to television and computer screen producers in the EEA, and ultimately the harm it caused to the European consumers over the years”.


The two CRT cartels are among the most organised cartels that the Commission has investigated. For almost 10 years, the cartelists carried out the most harmful anti-competitive practices including price fixing, market sharing, customer allocation, capacity and output coordination and exchanges of commercial sensitive information. The cartelists also monitored the implementation, including auditing compliance with the capacity restrictions by plant visits in the case of the computer monitor tubes cartel.

Top management level meetings, dubbed “green(s) meetings” by the cartelists themselves because they were often followed by agolf game, designed the orientations for the two cartels. Preparation and implementation were carried out through lower level meetings, often referred to as “glass meetings“, on a quarterly, monthly, sometimes even weekly basis. Meetings were held in various locations in Asia (Taiwan, Korea, Japan, Malaysia, Indonesia, Thailand, Hong Kong, etc.) and Europe (Amsterdam, Budapest, Glasgow, Paris, Rome). The cartels operated worldwide.

Multilateral meetings usually started with a review of demand, production, sales and capacity in the main sales areas, including Europe; then prices were discussed, including for individual customers, i.e. TV and computer manufacturers. They had therefore a direct impact on customers in the European Economic Area (EEA), ultimately harming final consumers. The cartelists were trying to address the decline of the CRT market in a collusive way, to the detriment of consumers. For example, one document recording the cartel discussions spells out clearly: “producers need to avoid price competition through controlling their production capacity”.


The investigation also revealed that the companies were well aware they were breaking the law. For instance, in a document found during the Commission’s inspections, a warning goes as follows: “Everybody is requested to keep it as secret as it would be serious damage if it is open to customers or European Commission”. The participants were therefore taking precautions to avoid being in possession of anticompetitive documents. Some documents spelled out, for example: “Please dispose the following document after reading it”.



The fines imposed are as follows:

Name of undertaking Reduction under the Leniency Notice (%) Fine for the TV tubes cartel1 (€) Fine for the computer monitor tubes cartel1 (€) Total fine1
Chunghwa2 100% 0 0 0
Samsung SDI 40% 81 424 000 69 418 000 150 842 000
Philips 30% 240 171 000 73 185 000 313 356 000
LG Electronics 0% 179 061 000 116 536 000 295 597 000
Philips and LG Electronics2 30%
(reduction only for Philips)
322 892 000 69 048 000 391 940 000
Technicolor 10% 38 631 000 38 631 000
Panasonic 0% 157 478 000 157 478 000
Toshiba 0% 28 048 000 28 048 000
Panasonic, Toshiba and MTPD2 0% 86 738 000 86 738 000
Panasonic and MTPD2 0% 7 885 000 7 885 000
TOTAL 1 142 328 000 328 187 000 1470 515 000

1 Legal entities within the undertaking may be held jointly and severally liable for the whole or part of the fine imposed.

2 Jointly and severally liable for that whole fine imposed.


Action for damages

Any person or firm affected by anti-competitive behaviour as described in this case may bring the matter before the courts of the Member States and seek damages. The case law of the European Court of Justice (ECJ) and the Antitrust Regulation (Council Regulation 1/2003) both confirm that in cases before national courts, a Commission decision is binding proof that the behaviour took place and was illegal. Even though the Commission has fined the companies concerned, damages may be awarded without these being reduced on account of the Commission fine. The Commission considers that meritorious claims for damages should be aimed at compensating, in a fair way, the victims of an infringement for the harm done.


A Cathode Ray Tube (“CRT”) is an evacuated glass envelope containing an electron gun and a fluorescent screen. Two distinct types of CRTs are relevant for the cartels sanctioned in today’s decisions: (i) colour display tubes (CDT) used in computer monitors and (ii) colour picture tubes (CPT) used for colour televisions. The CRT was gradually replaced by alternative techniques such as LCD and plasma displays.

[End of press release]


 You might perhaps care to view some of our earlier posts.  For instance:

1. Why? or How? That is the question (3 Jan 2012)

2. Partitocracy v. Democracy (20 July 2012)

3. The shoddiest possible goods at the highest possible prices (2 Feb 2012)

4. Capitalism in practice  (4 July 2012) 

5.Ladder  (21 June 2012)

 6. A tale of two cities (1)  (6 June 2012)

 7. A tale of two cities (2)  (7 June 2012)

 8. Where’s the beef? Ontology and tinned meat (31 Jan 2012)

Every so often we shall change this sample of previously published posts.


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