LG and Collusion (Ch 9)

 

 

 

 

 

Introduction

While most of my posts have been pretty enthusiastic about LG's products, innovations, leadership and strategies, this one is not so flattering. Here is an instance where LG was caught illegally colluding with Samsung.

What is Collusion?

Generally, when firms are in the same business and they conspire to set supplies, prices, divide up customers, coordinate marketing activities or share information about bids and other customer marketing activities, they are colluding. Doing this explicitly and having direct discussions about these things can be a violation of anti-trust laws in many countries.

What is Tacit Collusion?

Rather than having explicit discussions, the firms try to find creative ways to signal one another in a way that would achieve some level of coordination about pricing or supply with the other firm.

Could LG and Samsung Tacitly Collude?

It would be hard because of both firms' product differentiation strategies, and the existence of a good number of other firms in their space. If they could pull it off, it might be hard to detect because of these considerations. I have not been able to find any allegations of tacit collusion, although these firms are big competitors and might conceivably benefit from some degree of collusion.

So what did LG and Samsung Do?

According to this article from BBC, the firms explicitly colluded to fix the price on certain appliances in 2008 and 2009. The firms were fined a total of $39M.