Price fixing?

Over a period of many years, a system of disbursing energy commodities, namely gasoline, has evolved that has the distinct flavor of price fixing written all over it. If you take a look at the historical retail pricing of gasoline you will see that the two companies that supply it to Saipan charge the same amount (down to the tenth of a penny), shift prices, up or down, nearly simultaneously (within days, usually hours), and in general make every appearance of being one big happy monopoly instead of two competing companies. Historically they have gotten away with this illegal activity and that has made them even more bold about it. Last week we saw a prime example. One retailer jumped the gun and raised prices on fuel then rushed to “roll back” the price the next day while waiting for the other retailer to jack its price up. Once the “agreed upon” time arrived, sure enough, both companies raised prices once again to exactly the same retail price. Coincidence? Sort of unlikely.

We all understand the commodity they sell is a basic necessity for life in a modern society. Families need it, businesses small and large need it, you and I need it, even the gas companies themselves cannot get along without the stuff. We all also understand that we are a small and physically isolated marketplace that can easily be taken advantage of.

These two companies, no matter how many softball teams they might sponsor and no matter how much they advertise that they “give back” to the community, they do the giving and the sponsoring with ill-gotten, maybe even illegally gotten money. Price fixing, bid rigging, and other forms of collusion are illegal and are subject to criminal prosecution by the Antitrust Division of the United States Department of Justice. Price fixing is an agreement between business competitors to sell the same product or service at the same price. It is against the law.

The U.S. Department of Justice points out that collusion and price fixing are more likely to occur when several market conditions prevail.

When there are few sellers. (We in the CNMI have only two—a duopoly).

When the commodity being sold cannot be easily substituted for another (We would have a hard time putting water or iced tea in our gas/diesel tanks).

When a product is standardized. (Gasoline certainly meets this criterion. Gas is gas…not much separates one brand from the next).

When the sellers know each other through social connections, trade associations or legitimate business contacts. (It is hard not to know your competitor on an island this size).

That same DoJ points out that to give in to temptation to fix prices carries a heavy penalty under the Sherman Act. Each violation can produce a fine of up to $10 million for companies or 350 thousand dollars for individuals for each offence. How many times has gas sold for the exact same amount on Saipan no matter which station or brand? Price fixing can also violate provisions of the wire fraud and mail fraud statutes and other federal felony laws. This is serious business indeed.

I wonder when the Justice Department will start taking a cold hard look at the facts in the case of petroleum product sales in the CNMI. A Kindergarten student could compile a list of 50 or 100 newspaper articles that quote specific pricing and timing violations here in the CNMI. Imagine if a dedicated team of professional federal investigators got their hands on this. Maybe we would get a fair shake and a fair price for a change—once the violators got out of jail.