The American way of trustbusting

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: In 1970s America five executives convicted of fixing the price of sticky labels ended up having to give lectures about their misdeeds in after-dinner speeches—cruel and unusual punishment for the audience, if not the culprits. Today there is a growing awareness that cartels not only raise prices, but also blunt other benefits of robust competition, from innovation to higher productivity. Accordingly, America’s trustbusters prefer to punish market riggers with fines and prison than with black ties and brandy. Their tactics—which combine criminal punishment with the promise of immunity for whistle-blowers—are increasingly being followed across the world. And just as well, because cartels look as if they are more sophisticated and commoner than anyone thought.

That, at least, may be what emerges from raids Britain’s antitrust enforcer, the Office of Fair Trading (OFT), conducted towards the end of last month on the country’s four large supermarkets. The investigation has only just begun, but one possibility is that supermarket buyers used some of the world’s largest consumer-goods companies as a switchboard to swap information that would help them co-ordinate the prices of thousands of products, from soap to cola. Multinational companies including Britvic, Coca-Cola, Mars, Nestlé, Procter & Gamble, Reckitt Benckiser and Unilever have been asked to hand over data to the OFT.

The supermarkets deny any wrongdoing. They complain that trustbusters have become too big for their boots and that they are on a “fishing expedition” designed to assuage populist dislike for big business—especially for powerful retailers. In fact, the grocers do have some grounds for feeling put upon. Last week, Britain’s Competition Commission, the OFT’s sister organisation, published the findings of a two-year probe into the supermarkets, the third in-depth inquiry in less than a decade. The industry was again judged to be broadly competitive: market shares among the four biggest grocers have shifted, suggesting keen rivalry for customers rather than collusion.

The OFT’s raids point to two different lessons. Far from staging a broad anti-business trawl, the OFT seemed to know exactly what it was searching for. It looks as if the regulator had been told what to ask for by a whistle-blower, which suggests the American approach could turn up wrongdoing that investigators would never have spotted before. Indeed so many cartels have been confessed to in Europe that trustbusters, grappling with a huge backlog of cases, are having to ignore some to concentrate on the biggest ones.