Nation must deal with price fixing more sternly
Perhaps no other people in the world love instant noodles more than Koreans. Ramyeon (different from Japanese ramen) have been Koreans’ favorite snack ― or meal for the poor ― for the past half a century or so.
So it is all the more disappointing, and unforgivable, that the nation’s four largest instant noodle makers have fixed ramyeon prices for nearly a decade. These large business enterprises have prospered by cheating mainly the poor, powerless classes, including students far away from home and senior citizens living alone.
Even more repulsive are their methods. According to the Fair Trade Commission (FTC), market leader Nhongshim headed the scheme by raising prices first and forced the other three to follow suit from one week to six months later through sending emails.
Together, the four companies have colluded to jack up ramyeon prices by 50 percent over the past nine years, garnering 1.5 trillion won ($1.2 billion) in swollen revenue, exactly double the justifiable amount. Compare this with the FTC’s combined fine of a mere 135 billion won, and one can see why so many Korean firms, ranging from global technology firms to milk producers, have engaged in rampant price fixing.
Nhongshim flatly denies all charges of collusion, saying it is just a normal business practice to exchange information with firms in the same line and vowing to take the case to court, as most firms accused of price fixing have done in the past. We agree with FTC officials regarding the ``information exchange” with competitors as a new type of collusion according to global trends. The antitrust watchdog should beef up its investigations to win the upcoming legal battle.
One also can’t help but ask what has taken the FTC so long to uncover the price fixing, which was even evident to many consumers.
The trustbusters are complaining, in part justifiably, of manpower shortages and increasingly sophisticated tricks of violators. Yet we suspect a weak, inconsistent and often demonstrative administration has emboldened corporate violators. The FTC detected more than 3,500 cases of price fixing in 2010, but issued fines in only 66 of them with the average penalty amounting to just 2.3 percent of unfairly earned revenue.
Fixing prices is a crime that hurts fair competition, eroding the very foundation of capitalism and injecting anti-business sentiment among the public. The government must deal with them far more sternly, by levying prohibitive fines, imprisoning violators and auditing their firms.
Nobody likes to eat swollen noodles. Even less likable are those with swollen price tags.
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