Since we launched MetalMiner back in December 2007, we don’t recall ever writing about price fixing until very recently. Ironically just a week ago we commented on it in passing reference to a study done on the steel industry which covered the topic of price fixing back in the 1800’s. And yet Reuters reports that ArcelorMittal South Africa could be fined for 10% of turnover (revenues) and exports! In this case, the price fixing appeared in the form of an almost inverse anti-dumping case. In anti-dumping, the domestic mills file a case based on how much lower the import price is vs. the domestic price. In this price fixing case, steel buyers were paying prices that equaled the import price, despite the fact that South Africa is a net exporter of steel, according to the Reuters story. In theory, domestic steel buyers should have enjoyed a price discount, relative to export markets.
The price fixing involved other firms (otherwise, where would the collusion be right?). Those firms included Cape Gate (Pty) Ltd and Cape Town Iron Steel Works (Pty) Ltd whereas a fourth company, Scaw South Africa (Pty) Ltd applied for leniency. Apparently the collusion occurred during information exchanges as part of each company’s membership in the South African Iron and Steel Institute (SAISI). And according to the Commission that issued the findings, Scaw admitted its participation in the cartel and confirmed that there has been a long-standing culture of cooperation amongst the steel mills regarding the prices to be charged, and discounts to be offered, for their steel products. The cooperation extended to arrangements for market division.
In all fairness to the steel industry, many industries face charges of price fixing. Epson will also plead guilty to price fixing for thin film transistor liquid crystal displays (better known as LCDs). Another case involves tomatoes.
One lesson we are reminded from in that old steel price fixing study is this: price fixing tends to occur more frequently as markets rise and less so as they fall.