EVERYBODY’S BUSINESS - Conspiring Against Competition

Written by Philip Mattera

Earlier this year, a federal judge in Minnesota granted final approval to a $75 million settlement between Smithfield Foods and plaintiffs alleging that the company was part of a conspiracy to fix the prices of pork products.

Around the same time, a federal judge in New York approved a $56 million settlement of a class action lawsuit in which two drug companies were accused of conspiring to delay the introduction of a lower-cost generic version of an expensive drug for treating Alzheimer’s Disease. 

These court actions are part of an ongoing wave of illegal price-fixing conspiracies by large companies throughout most of the U.S. business world. The scope of the antitrust violations is revealed in a report recently published by my colleagues and I at the Corporate Research Project of Good Jobs First. The report, entitled Conspiring Against Competition, draws on data collected from government agency announcements and court records for inclusion in the Violation Tracker database.

We looked at over 2,000 cases resolved over the past two decades, including 600 brought by federal and state prosecutors as well as 1,400 class action and multidistrict private lawsuits. The corporations named in these cases paid a total of $96 billion in fines and settlements.

Over one-third of that total 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) and food products ($2 billion).

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 non-financial company is Teva Pharmaceutical Industries, which with its subsidiaries has shelled out $2.6 billion in multiple generic-delay cases. Just about every other major drug producer has been involved in one or more of these cases.

Many of the defendants in price-fixing cases are subsidiaries of foreign-based corporations. They account for 57 percent of the cases we documented and 49 percent 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). U.S. subsidiaries of companies headquartered in Japan and Germany have also been involved in numerous price-fixing cases, especially those involving automotive parts and electronic components.

Along with alleged conspiracies to raise the prices of goods and services, the report reviews litigation involving schemes to depress wages or salaries. The most significant wage-fixing cases have occurred in the poultry processing industry, where companies including Pilgrim’s Pride have paid over $40 million in antitrust settlements. Groups of hospitals in Michigan and upstate New York have paid over $70 million to resolve allegations they conspired to depress the wages of nurses.

Employers may also conspire to depress wages indirectly—by agreeing not to hire people who have been working for a competitor. The largest no-poach settlement occurred in 2015, when Apple, Google, Intel and Adobe Systems paid a total of $415 million to class action plaintiffs. Cases have also occurred in blue-collar occupations. For example, in 2022 a group of trucking companies paid over $11 million to settle a lawsuit challenging their use of a no-poach agreement covering drivers. Several other no-poach cases are pending in the courts.

These no-poach agreements inhibit worker mobility and thus bring down pay levels—similar to the effect of non-compete agreements employers often compel workers to sign.

Despite the billions, 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. They apparently regard the penalties as a tolerable cost of doing business.

Higher penalties could help reduce recidivism, 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.

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