Argos had the same incentives, which were to
Argos and Littlewoods Price Fixing Arrangement 1. The oligopolistic features of the toy market are that there are two dominant retailers that dominate the market. There is a significance of advertising, such as them trying to dominant the price of their products. Lastly, there are no barriers to entry. These two firms have cost advantages due to the expansion of the company.
In a perfectly competitive environment Hasbro, Argos, and Littlewoods wouldn’t have been able to have a price-fixing agreement because everyone would be charging the same price for their products, so they would be losing money in the long run. . There were two bilateral agreements between Hasbro and Argos and Hasbro and Littlewoods, and one trilateral agreement, which enabled the exchange of pricing information between all three companies. The companies’ prices were fixed on selected Hasbro products to Hasbro’s recommended retail prices and introduced certainty in reference to the actions of a rival. The symptoms and tests of collusive behavior are that no two companies should join together to dominate the pricing of their competitors.There is an incentive to cheat just like Hasbro, Argos, and Littlewoods did because of the huge profits and expansion of their companies.
However, because the larger companies join together, the smaller companies end up going out of business due to unfair competition. 3. There are three conditions within an oligopolistic market structure that make it possible for dominant firms to collude; military, maintaining global competitiveness, and the expansion of new technology. Collusion isn’t cheat proof because there could be other reasons or opportunities for companies to break agreements with each other.
If a firm sees a better opportunity to increase revenues, they’re going to take that chance. Three dominant firms came together to reduce the numbers of competitors because they saw an opportunity. The only reason it’s allowed in the U. S.
with few restrictions is so we can keep global competitiveness instead of us competing against each other. So we’re essentially cheating in order to stay ahead of everyone else in the world. 4.
All three companies had the same incentives, which were to stay on top and keep the competition away.Once the companies came together, they would no longer have to worry about any other firm getting in their way because they would be the price setters. Argos’ revenue increased and they no longer had to worry about their catalogue rival which was Littlewoods. Littlewoods benefited from less advertising and increased their revenues. Hasbro maintained its manufacturing profits by joining into this arrangement with Argos and Littlewoods. 5. The Office of Fair Trading decision changed the competitive landscape of toy retailing.
Due to new technology, consumers can do price comparisons. This leans more towards a perfectly competitive environment. In the end, Hasbro applied for leniency and satisfied the requisite conditions in the Office of Fair Trading guidelines so they avoided having to pay any penalty. Argos and Littlewoods were hit with the penalty for infringement of the Competition Act of 1998. They both faced a ten percent of company turnover penalty. Argos paid 198.
11 million in fines based on turnover values and Littlewoods paid 5. 63 million in fines. 6.The direct costs of government regulation as applied through competition policy are through administration and legislation of laws. The penalty is set at an upper limit of ten percent of company turnover. The government is responsible for monitoring businesses and doing all needed investigations to make sure businesses are following set guidelines.
Direct costs also involve setting the penalties and enforcing them. Indirect costs of government regulations are that third parties including injured competitors, customers and consumer groups can bring damages claims against them.