Vitamin Inc. Cartel

Some of the world’s largest pharmaceuticals companies were fined a massive £534m for operating an illegal price-fixing cartel on the supply of vitamins throughout the 1990s.

Mario Monti, the European Union’s competition commissioner, said the cartel could be dubbed Vitamins Inc, and was the most damaging and serious it had ever investigated and had cheated European consumers of billions of pounds since vitamins were used in and affected the price of a whole range of products.

He described how senior executives in 13 companies had cynically collaborated to ensure that consumers paid over the odds for vitamins used on their own and in products such as cereals, biscuits, drinks, pharmaceuticals and cosmetics.

“It is particularly unacceptable that this illegal behavior concerned substances which are vital elements for nutrition and essential for normal growth and maintenance of life,” Mr Monti said.

“The companies’ collusive behavior enabled them to charge higher prices than if the full forces of competition had been at play, damaging consumers and allowing the companies to pocket illicit profits.”

Roche, the Swiss pharmaceuticals company, received particular criticism and was given the biggest fine of all – £288m – while German firm BASF was deemed to be the second worst offender and made to pay a fine of £185m.

When Mr Monti was asked whether the 13 firms were in effect just one big global monopoly which could be dubbed Vitamins Inc, he agreed. Others fined included Aventis (£3m), Solvay (£5.7m) and Merck (£5.7m), together with three Japanese firms which were fined a total of £46m.

The commission described how the companies had operated a highly organised cartel holding regular meetings to collude on prices, exchange sales figures and coordinate price increases.

The cartels were run, Brussels said, “at the most senior levels of the undertakings concerned”.

The commission concluded after its two-year investigation: “The prime mover and main beneficiary of these schemes was Hoffman La Roche, the largest vitamin producer in the world, with some 50% of the overall market.

“The involvement of some of its most senior executives tends to confirm that the arrangements were part of a strategic plan conceived at the highest levels to control the world market in vitamins by illegal means.”

The investigation was helped by one of the offenders – French company Aventis – which agreed to “defect” and furnished the commission with what Mr Monti called “decisive information”. As a reward, Aventis was fined just £3m instead of a figure nearer to £70m.

A similar story enlightens us with another price fixing by European Glass makers. And here.

Original Article Source

Vamsi Krishna Duvvuri

MBA Class of 2009

Goizueta Business School

Prisoner’s Dilemma explained Eric Cartman’s way

Now, before I get started here, I hope everybody knows Eric Cartman, and may be, some of you might have seen this Southpark episode. In reality, it might not be the most apt way of explaning prisoner’s dilemma, but it sure is a fun way of knowing more about it.

So, what am I talking about? Lets see, first let us define PD: A situation where two or more players are involved in a deal (or a understanding of co-operation), each player has an incentive to defect (or betray his or her partner(s)) after which the other players may select a move which would then result in competition between those players.

The classic example through which PD is explained most easily is as follows:

Two suspects are arrested by the police. The police have insufficient evidence for a conviction, and, having separated both prisoners, visit each of them to offer the same deal. If one testifies (“defects”) for the prosecution against the other and the other remains silent, the betrayer goes free and the silent accomplice receives the full 10-year sentence. If both remain silent, both prisoners are sentenced to only six months in jail for a minor charge. If each betrays the other, each receives a five-year sentence. Each prisoner must choose to betray the other or to remain silent. Each one is assured that the other would not know about the betrayal before the end of the investigation.

In Southpark’s episode 99 (S7E3), the gang is punished by their art teacher for messing around in the art class, and so the kids plan to get back at the teacher by TPing her house. After “decorating” the house that night, Kyle has nightmares about the incident, the art teacher’s house and her crying children, and he can’t sleep anymore.

TP-ed house

Cartman, as the genius he is, comes up with a “perfect alibi”: Last night, all four of us were at the bowling alley until about 7:30, at which time we noticed Ally Sheedy, the Goth chick from The Breakfast Club, was bowling in the lane next to us, and we asked her for her autograph, but she didn’t have a pen, so we followed her out to her car, but on the way we were accosted by five scientologists who wanted to give us all personality tests, which were administered at the Scientology Center in Denver until 10:45, at which time we accidentally boarded the wrong bus home and ended up in Rancho de Fritos Rojos, south of Castle Rock, and finally got a ride home with a man who was missing his left index finger, named Gary Bushwell, arriving home at 11:46.” However, when the counseler calls each of them to the room individually (to see if one or more could mix the story and ride out the others for a better deal), they get nervous and try to tell the exact same story. It seems at the end of that meeting, they manage to stick to story.

Cartman telling the alibi story (Click to listen to the story)

Kyle’s guilt gets better of him, but Cartman senses the situation and plans to kill Kyle. However, since Stan and Kenny refuse to help him, he takes Kyle in a boat-ride to Stark’s pond and tries to kill him by hitting him with a wifflebat, and fails to do so, obviously. So, Kyle, Stan and Kenny go to Officer Barbrady, who has arrested Butters as the prime suspect, for the confession. However, after seeing butters in Jail, Cartman tries to ensure the confession from his friends is never deliver. Stan requests Cartman to confess as well, but Cartman refuses to do so…

The next day  Stan, Kyle and Kenny rush into the Principal’s office, only to find out that Cartman confessed earlier in a bid to secure a better deal for himself. Each of the boys ends up with two weeks’ detention, except for Cartman, who gets only one for “being brave”.

Another example – Dilbert’s Dilemma

Vamsi Krishna Duvvuri

MBA Class of 2009

Goizueta Business School