Gas Price Fixing in Quebec

(The Business Ethics Blog is back, after a short hiatus. FYI, this blogger is spending the summer as a Visiting Researcher at the Centre de recherche en éthique at the University of Montreal. Terrific city, terrific ethics centre. OK, onward…)

Don’t you just hate it when conspiracy theorists turn out to be right, or even roughly right?

With gas prices soaring, there’s been plenty of yammering about price-fixing. Surely if prices are so high, it must be because gas companies are colluding to jack up prices. The mere forces of supply and demand couldn’t possibly cause prices to rise, minus some greed-driven chicanery on the part of Big Oil. Right? Right?

Sigh.

Well, turns out (some of) the suspicions were (at least partly) right. A bunch of gas stations here in Quebec have just been charged with price-fixing. And a bunch of individuals and businesses have already pleaded guilty.

Here’s the story from the Globe & Mail: Price-fixing scandal fuels uproar

Christian Goulet has helped fuel a firestorm in Quebec over prices at the pumps.
Mr. Goulet’s statements in a local paper that he received threats from rivals because he was selling fuel at his gas station at lower prices than theirs formed the basis for a sweeping competition-watchdog probe into price-fixing in four Quebec markets.
The article, published four years ago in a Victoriaville biweekly, culminated in the federal Competition Bureau’s laying of criminal charges against 13 individuals and 11 companies in four markets: Victoriaville, Thetford Mines, Magog and Sherbrooke.

Here’s another version en francais, from Radio-Canada: Le Bureau de la concurrence sévit (the headline translates roughly as “Competition Bureau Cracks Down”)

And here’s an editorial on the topic, from the National Post: The honest price of gas

The Competition Bureau’s discovery of a price-fixing conspiracy at gas stations in four southeastern Quebec cities has led to an apparent wave of “Gotcha!” sentiment among Canadian drivers harried by high prices at the pump. There has always been a strain of opinion that sees something deeply suspicious in the similarity in prices that usually prevails over a geographical area, on any given day, in the consumer market for gas. With prices now hovering around $1.30 a litre in major metro areas, the perennial grumbling is turning into rage. Are the dirty tricks in Sherbrooke and Victoriaville just the tip of the iceberg? Are the rest of us being victimized by the oil companies too?

A couple of things worth noting, here. First, yes, the conspiracy theorists were at least partly right. There’s been evidence of at least local price fixing. No evidence (that I know of) for the holy-grail of gas-price conspiracies, namely the claim that the head offices of the big oil companies are engaging in price fixing.

Second, the story is an interesting study in corporate responsibility for the acts of its agents. Major gas companies keep track of the prices charged by their stations. As noted in the National Post editorial, “A few stations apparently remained outside the cartel, and according to Ultramar, one of the companies that pleaded guilty, its operation required a sales representative to lie to his superiors about local price fluctuations.” It’s another example of how hard it is for large organizations to monitor the activities of their branches & employees, even when (let us assume) they are motivated to do so.

A final thing worth noting — one thing I wouldn’t have (but probably should have) anticipated about this story — is that the price-fixing was achieved at least in part through intimidation. Stop picturing a back-room deal, featuring greedy, cigar-smoking executives cackling as they decide how to divide the spoils of their evil deeds. The truth is more interesting. Conspiring to jack up prices required not just simple agreement, but an agreement apparently enforced by good old-fashioned thuggery. The hero in this story — the gas station owner who went public — simply wanted to conduct business in the good old-fashioned capitalist way, doing his best to make his product available to the public at a price better than the competition.

——
(Merci à Dominic pour l’idée!)

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