Earlier this month, the news media reported a story about alleged collusion and price fixing that involved three makers of chocolate candy. Most of us who have visited a department store, supermarket, or any other retail outlet have seen chocolate candy on the shelves. It does not take long to realize that many different makers produce the chocolate both domestically and overseas. Nevertheless, it is possible that Canada’s Competition Bureau may actually investigate allegations of price fixing involving three of those confectioners.
In the viewpoint of this free-market writer, something of a free market prevails in the manufacture of candy and confectionary. Many players produce a very wide range of edible treats that contain chocolate. If a small number of players in a given sector of the market choose to collude to fix their prices, it raises the question of how exactly they are harming the consumer given the presence of much unregulated competition operating in the same market. The door may in fact be very wide open for the competition to sell their chocolate products at very competitive prices.
A visit to several retail outlets including Metro, Food Basics, Giant Tiger, Loblaws, Walmart, Bulk Barn and Dollarama reveals that they all carry many chocolate products from many different suppliers and makers that were on sale at low prices. Even someone on a restricted budget has access to a wide variety of chocolate products at low prices. If someone actually colluded to fix the price of chocolate, the evidence on the shelves at the retail outlets suggests that they had little success.
If someone were actually to succeed in fixing the price of chocolate, they would need the cooperation of growers of cocoa beans, the raw material from which chocolate is made. They would need to restrict the supply by “paying off” the growers in tropical climates in Africa and South America. A reduction in the world supply of cocoa beans would raise its price on world cocoa markets, given steady worldwide demand for chocolate.
But any restriction in the supply of cocoa beans would much more likely be the result of adverse weather conditions or civil strife in nations that grow cocoa beans. There have been tropical storms, droughts, earthquakes and volcanic eruptions of late in several regions, including where cocoa beans grow. But containers of powered cocoa are still readily available on the shelves of retail outlets and at prices similar to those that prevailed last year. Bulk Barn recently had a sale on powdered cocoa about a week prior to the chocolate price-fixing story hitting the airwaves.
While a hobby chef could buy the ingredients and make an exotic chocolate delicacy at home, it actually costs less to buy readymade chocolate candy from a retail store. This is the result of buying the ingredients in massive quantities and producing the end product using organized mass-production, combining mechanization with the efficient division of labour and economies of scale. It is this end of the chocolate market that has become the target of collusion and price fixing, not the top end of the highly-priced, specialty chocolate market that is open to competition from hobby chefs.
Yet the news media actually chose to report a story in early June about three Canadian companies colluding to fix the price of chocolate, with the possibility that Canada’s Competition Bureau may actually investigate the allegations. Given the ridiculous nature of the story, it may have been more appropriate to broadcast the allegations on April 1st. But now the nation may witness an even more ridiculous spectacle of an “at arm’s length” government agency actually launching an investigation into the allegations. Who is going to cover the cost of this farce? The taxpayer, of course.
From a free-market perspective, the three colluding companies would have only played into the hands of their unregulated competitors had they actually colluded to fix the price of chocolate candy. Only a monopoly player that is free from unregulated competition could ever successfully engage in price fixing. And only a government could ever assure such freedom from competition. Canada’s Competition Bureau is powerless to investigate government-regulated monopolies that are the turf of the marketing agencies, agencies that get “captured” by the industries they regulate. So the Competition Bureau is left to investigate chocolate price fixing.
* Harry Valentine is a free-marketeer living in Eastern Ontario.