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5 Brazen Examples of Price Fixing

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After Steven Soderbergh's adaptation of Kurt Eichenwald's nonfiction book The Informant debuted to largely positive reviews last weekend, price fixing is all the conversational rage again. Okay, that statement is not even remotely true, but Soderbergh's film, which details a mid-1990s scheme to rig the price of the animal feed additive lysine, at least brought the anti-competitive practice to the big screen.

Just how common is price fixing, though? That's tough to say, but let's have a look at a few notable examples from business history.

1. Roche Doesn't Learn Its Lesson

In 1973, Stanley Adams was an executive at the Swiss pharmaceutical firm Hoffman-LaRoche when he uncovered some rather incriminating documents about his employer. It turned out that the company was part of a price-fixing scam in the international market for vitamins. Adams decided to pass his findings on to the European Economic Commission in a confidential memo detailing how Roche manipulated the bulk vitamin market.

rocheAdams kept his end of the deal with the EEC, but the Commission did a lousy job with the whole "confidential" thing. It accidentally gave Roche copies of documents that included the whistleblower's name, and under Swiss law, that meant Adams could be arrested for industrial espionage and theft. Adams spent months in solitary confinement in a Swiss prison; his wife was so distraught that she committed suicide.

Eventually Adams got out of jail, and Roche somehow managed to avoid taking a hard hit for its role in the price fixing. Getting off the hook for this offense may have just made the company more brazen, though. From 1990 to 1999, it engaged in an illegal price-fixing cartel for vitamins again, and this time Roche and its co-conspirators got nabbed. In 1999, the company pled guilty to price fixing in the U.S. and paid a $500 million fine. Within two years, the European Union had also taken Roche to task for its nefarious pricing and fined the company to the tune of 462 million euros.

2. Heavy Equipment Gets Heavy Prices

If you needed to buy heavy equipment in the 1950s, you were probably going to pay too much thanks to a price-fixing cartel headed by General Electric and Westinghouse.

The biggest players in the equipment market met secretly to fix prices on items like turbines and switch gear.

So who blew the whistle on this cartel? Nobody. The Tennessee Valley Authority actually caught the companies red-handed. When reviewing its financial records, the TVA found something strange: for the previous three years, 47 manufacturers had been submitting identical bids for projects. Since the bids were supposedly a secret, something seemed amiss; for example, it was a bit fishy that the TVA would get eight identical bids of $12,936 for an order of 4200 insulators.

How did the scam work? The heads of these companies would meet at public locations like golf courses and restaurants and pick out both a winning bid and a separate set of identical losing bids for each project or order.

Companies got the right to submit the winning bid by a rotation system based on - no joke - the phases of the moon. The system bilked taxpayers out of nearly $175 million each year.

When the government unraveled this plot in 1960, it dropped the hammer on the price fixing executives. Nearly 50 execs paid large fines, and nine employees of GE and Westinghouse spent a month or more in jail.

3. British Dairies Milk the Customers' Wallets

In late 2007, British fans of milk and cheese got some bad news: their supermarkets and milk suppliers had been illegally rigging the prices of dairy products since 2002. The Office of Fair Trade learned that many of the U.K.'s largest supermarket chains had been colluding to raise the prices of dairy products, and their milk distributors, namely Dairy Crest and Robert Wiseman Dairies, had been the go-betweens for the ostensibly secret pricing decisions.

The anti-competitive behavior supposedly cost customers close to 270 million pounds over the course of the scam, and the companies involved faced fines that maxed out at a combined 116 million pounds.

4. Flat Glass Gets a Flat Price

In 2007, the European Commission undermined a price-fixing scheme among the makers of flat glass, the variety that is used to make windows, doors and mirrors. In 2004 and 2005, four major makers of flat glass—Asahi, Guardian, Pilkington, and Saint-Gobain—secretly met to discuss artificially raising their prices.

As a result, the 1.7-billion-euro flat glass industry got a nice little bump in its revenues, or at least it did until the European Commission got to the bottom of the strange pricing. The Commission didn't take it easy on the offending parties, either. It fined the four companies a total of nearly 487 million euros for violating the ban on cartel behavior and price fixing.

5. British Airways Gives Fuel Prices a Hike

baRemember the soaring fuel prices that gripped the travel industry a few years ago? British Airways found a less-than-scrupulous way for the rising prices to help pad its bottom line. When airlines started tacking fuel surcharges onto passengers' flight costs, someone at BA apparently saw a way to make some quick cash.

In 2004, the airline entered into secret talks with its rival Virgin Atlantic to simultaneously bump up their fuel surcharges, a practice that continued into 2006. Over the course of the collusion, fuel surcharges rose from an average of five pounds a ticket to over 60 pounds a fare.

When Virgin Atlantic's lawyers realized what the company had done, they did the only thing they could do: they ratted out British Airways. Virgin ended up getting immunity for providing the goods on its former partner in collusion, while BA got walloped with record fines. The British Office of Fair Trading nailed the airline for 121.5 million pounds, while the American Department of Justice smacked it with an additional $300 million fine. Ouch.

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Pop Culture
How Jimmy Buffett Turned 'Margaritaville' Into a Way of Life
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Few songs have proven as lucrative as “Margaritaville,” a modest 1977 hit by singer and songwriter Jimmy Buffett that became an anthem for an entire life philosophy. The track was the springboard for Buffett’s business empire—restaurants, apparel, kitchen appliances, and more—marketing the taking-it-easy message of its tropical print lyrics.

After just a few years of expanding that notion into other ventures, the “Parrot Heads” of Buffett’s fandom began to account for $40 million in annual revenue—and that was before the vacation resorts began popping up.

Jimmy Buffett performs for a crowd
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“Margaritaville,” which turned 40 this year, was never intended to inspire this kind of devotion. It was written after Buffett, as an aspiring musician toiling in Nashville, found himself in Key West, Florida, following a cancelled booking in Miami and marveling at the sea of tourists clogging the beaches.

Like the other songs on his album, Changes in Latitudes, Changes in Attitudes, it didn’t receive a lot of radio play. Instead, Buffett began to develop his following by opening up for The Eagles. Even at 30, Buffett was something less than hip—a flip-flopped performer with a genial stage presence that seemed to invite an easygoing vibe among crowds. “Margaritaville,” an anthem to that kind of breezy attitude, peaked at number eight on the Billboard charts in 1977. While that’s impressive for any single, its legacy would quickly evolve beyond the music industry's method for gauging success.

What Buffett realized as he continued to perform and tour throughout the early 1980s is that “Margaritaville” had the ability to sedate audiences. Like a hypnotist, the singer could immediately conjure a specific time and place that listeners wanted to revisit. The lyrics painted a scene of serenity that became a kind of existential vacation for Buffett's fans:

Nibblin' on sponge cake,
Watchin' the sun bake;
All of those tourists covered with oil.
Strummin' my six string on my front porch swing.
Smell those shrimp —
They're beginnin' to boil.

By 1985, Buffett was ready to capitalize on that goodwill. In Key West, he opened a Margaritaville store, which sold hats, shirts, and other ephemera to residents and tourists looking to broadcast their allegiance to his sand-in-toes fantasy. (A portion of the proceeds went to Save the Manatees, a nonprofit organization devoted to animal conservation.) The store also sold the Coconut Telegraph, a kind of propaganda newsletter about all things Buffett and his chill perspective.

When Buffett realized patrons were coming in expecting a bar or food—the song was named after a mixed drink, after all—he opened a cafe adjacent to the store in late 1987. The configuration was ideal, and through the 1990s, Buffett and business partner John Cohlan began erecting Margaritaville locations in Florida, New Orleans, and eventually Las Vegas and New York. All told, more than 21 million people visit a Buffett-inspired hospitality destination every year.

A parrot at Margaritaville welcomes guests
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Margaritaville-branded tequila followed. So, too, did a line of retail foods like hummus, a book of short stories, massive resorts, a Sirius radio channel, and drink blenders. Buffett even wrote a 242-page script for a Margaritaville movie that he had hoped to film in the 1980s. It’s one of the very few Margaritaville projects that has yet to have come to fruition, but it might be hard for Buffett to complain much. In 2015, his entire empire took in $1.5 billion in sales.

As of late, Buffett has signed off on an Orlando resort due to open in 2018, offering “casual luxury” near the boundaries of Walt Disney World. (One in Hollywood, Florida, is already a hit, boasting a 93 percent occupancy rate.) Even for guests that aren’t particularly familiar with his music, “Jimmy Buffett” has become synonymous with comfort and relaxation just as surely as Walt Disney has with family entertainment. The association bodes well for a business that will eventually have to move beyond Buffett’s concert-going loyalists.

Not that he's looking to leave them behind. The 70-year-old Buffett is planning on a series of Margaritaville-themed retirement communities, with the first due to open in Daytona Beach in 2018. More than 10,000 Parrot Heads have already registered, eager to watch the sun set while idling in a frame of mind that Buffett has slowly but surely turned into a reality.

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Design
The Secret to the World's Most Comfortable Bed Might Be Yak Hair
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Savoir Beds laughs at your unspooling mail-order mattresses and their promises of ultimate comfort. The UK-based company has teamed with London's Savoy Hotel to offer what they’ve declared is one of the most luxurious nights of sleep you’ll ever experience. 

What do they have that everyone else lacks? About eight pounds of Mongolian yak hair.

The elegantly-named Savoir No. 1 Khangai Limited Edition is part of the hotel’s elite Royal Suite accommodations. For $1845 a night, guests can sink into the mattress with a topper stuffed full of yak hair from Khangai, Mongolia. Hand-combed and with heat-dispensing properties, it takes 40 yaks to make one topper. In a press release, collaborator and yarn specialist Tengri claims it “transcends all levels of comfort currently available.”

Visitors opting for such deluxe amenities also have access to a hair stylist, butler, chef, and a Rolls-Royce with a driver.

Savoir Beds has entered into a fair-share partnership with the farmers, who receive an equitable wage in exchange for the fibers, which are said to be softer than cashmere. If you’d prefer to luxuriate like that every night, the purchase price for the bed is $93,000. Purchased separately, the topper is $17,400. Act soon, as only 50 of the beds will be made available each year. 

[h/t Travel + Leisure]

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