Less than two weeks ago, I purchased a 2kg container of Jalna Pot Set Natural Greek Yoghurt for $12.40 Woolworths in Erskineville. I’d checked and it was also $12.40 at Coles. Yesterday I went to buy another at Woolworths. The price had risen to $14. I checked Coles, and it had risen to $14 there too.
There is a third possibility, price matching. If it is important to them some retailers will copy the price of main competitors for some items. It may take the form of ‘we will match cheaper prices if you mention it’ or they may just do it as soon as they find out that the competitor has moved. This is not collusion as there is no agreement between parties.
Semantics and legalities aside, it is interesting how often Colesworths and so many other companies of all kinds seem to have the same prices for the same products and change their prices within moments of each other. It must be just good business sense? But as you wrote it is not technically collusion. But IMO nor does it reflect random coincidence.
Our independant “warehouse” supermarket used to display the ColesWorth brochures saying they had Price Matched, but it became obvious that they were consistently cheaper and buyers who were not rusted on to the Big 2 became frequent customers. They dropped the practice a couple of years ago.
I go to Coles about three times a year to get Yorkshire Tea which isn’t sold anywhere else near us. I usually check a few prices, and they are consistently higher than where I shop now.
It is planned and deliberate activity by one party, neither coincidence nor collusion.
Collusion involves the parties consulting each other to fix pricing and society has plenty of examples where that occurs , Eg petrol. Other might see has close oversight on each other pricing but when this results in price hiking then there is not a competitive market dynamic, ie no true competition.
Yes its semantics mostly - a word play. I do think and see however a quite aggressive attempt to compete with supermarkets for customer attention usually on key goods like bread and dunny rolls etc, but, where a product can be controlled on margin and there is plenty of them, margin is protected and prices forced higher. Supermarkets may not directly collude, but supplier agreements where ColesWorth have effective exclusivity (or at least significant influence) there is no doubt prices are ‘managed’.
… in my humble opinion…
If prices come down to match, it’s competition at work. If prices go up to match, it’s collusion at work. It seems to some.
No, it is the free market at work. Prices adjusting to supply and demand and competition.
In the addition to the above, many manufacturer’s have recommended retail prices as a guide for retailers to sell their products.
As dairy products have increased in price substantially in the past 12-18 months, it is likely the Jalna Pot Set Natural Greek Yoghurt has be subject to another price rise by the manufacturer. It is possible that the $14 is that recommended by the manufacturer based on the wholesale price of the product. Both supermarkets may have chosen to use/accept this RRP.
An RRP is a curious concept. The manufacturer advising its sellers how much profit they should get, assuming each seller pays them the same amount. Profits will vary depending on the efficiency of the seller. Competition when all use it to justify their pricing and religiously follow along? I think not.
Prices seem to jump all the time lately:bangbang: massive rises one after another:woozy_face:
I used to sell my services as a consultant. Observing what others charged was a necessary, honest and rational thing to do. If I set my rates much higher I would struggle to get jobs, if I set them much lower I was losing money. I never consulted with or decided with others who I was competing against before setting my rate.
That is not the same decision making process as somebody selling widgets where there is often room to adjust how many they make in determining the best price point. As a one man band there were only so many hours I could sell in a week and I had to get the best rate possible for those hours. Even if the criteria for deciding were different, the process was the same in gathering data and in that you don’t need to collude to do it.
In getting the best rate I was sometimes offered deals that were not vendor collusion but mostly I turned down anyway. In some cases if I thought it would be the best results for all concerned I would talk to all the parties and get their agreement. You get return business and recommendations by looking after your clients as well as yourself.
Colluding is trying to defeat market forces to your advantage. Considering the state of the market, including price matching, is the market working properly. It is not a word game - there is a real difference.
‘Collusion’ in some of its inclusive forms is business as usual in our market although aspects happen in most markets. I am happy to differentiate the plight of an individual or sole trader vis à vis a Bunnings or Colesworths sized business. This from the UK.
Then are are joining others in making assumptions. From your example :
Collusion occurs when rival firms agree to work together …
That is not a consequence of size of the operation it is a result of an agreement to corrupt the free market. You must take certain active steps to collude. Now Bunnies or Colesworths may do that but without evidence of agreement we cannot assume it is so.
It may well be simply a function of being a member of the oligopoly. There are many ways (including market concentration) to reduce competition but unless there is agreement it is not collusion. Assuming there are only two possible reasons and if it isn’t coincidence it must be collusion, which is where we started, is not good logic unless you can show both that there are only two possibilities and that coincidence isn’t the case.
You are now freelancing things I neither wrote nor intimated. Read the link - Types of Collusion - tacit collusion and price leadership. A broad brush definition allowed? or back to semantics?
If we are going to draw tacit collusion as something different requiring no agreement then we must name it so and make sure that the unethical/illegal connotations of agreed collusion are not applied. Economists may make a definition for types of collusion without agreement, the OED does not:
Forms: 4 collucione, 5–6 col(l)usyone, -owne, -ion, 6 col(l)ucion, -sioun, 6– collusion.
1.1 gen. Secret agreement or understanding for purposes of trickery or fraud; underhand scheming or working with another; deceit, fraud, trickery.
Take the example of the price from one vendor following another. Without qualification it is often assumed that this is a sign of unethical/illegal conduct.
Why am I going on and on about this? Because of the assumption of guilt that goes with collusion.
FYI - Woolies do their own brand of this yogurt which is cheaper and there is Aldi which is cheaper again!
Woolies and Coles have been in the media over the years about how they bully suppliers, set shelf space limits and screw suppliers on pricing etc. Most of this is around forcing suppliers into a position of supplicant so that Woolies and Coles can dictate terms and and shore up their own profit margin. A duopoly is close to a monopoly in terms of price fixing and there needs to be good oversight to prevent collusion or the perception of collusion.
I guess you are not aware that the ACCC are constantly looking at price fixing, collusion, cartels, price forcing, and other anti-competitive behaviour.
They do get serious. Like this latest.
The power of a duopoly or duopsony works well without any kind of collusion. I don’t know how you prevent the perception of collusion.
Overly concentrated markets are plentiful in this country, the supermarkets are but one example, but that boat has sailed.
A timely reminder and some interesting figures on market concentration in Oz.
Certainly I am aware of the ACCC and its sporadic detection of corrupt behaviour. The issue is that the duopoly allows the players to compete when they want and fix the price when they don’t. Like the Fossil Fuel industry, all the prices seem to move of their own accord with no actual contact as the system is set up so they all know the unwritten rules and play within them. The duopoly is supposed to ensure competition and vertical integration is supposed to deliver cheaper prices, however it looks more like teh duopoly allows the companies to share the market segment and vertical integration (own brands and produce) to keep suppliers in line and ensure profit margin.