Laissez-Nous Faire Dans La Belle Province

The legend goes that in the 1680s a group of French merchants, led by a certain M. Le Gendre, were being interviewed by Jean Baptiste Colbert, a highly interventionist minister of Louis XIV.  Eager to promote French commerce, which would in turn allow Colbert to better finance his king's many wars, he asked how the state might encourage economic development.  M Le Gendre is supposed to have replied: "Laissez-nous faire."  Translated roughly as "leave us alone."  It is an example of wisdom and bravery, in the cause of liberty and prosperity, that seems to have been forgotten in modern Quebec.  In recent weeks it may seem that the Gods of the Copybook Headings has taken a fancy to Quebec-bashing.  Mais non.  We wish our fellow Canadians nothing but the best, at least those still loyal to crown and country - a sadly dwindling minority in that province. 

Where we see threats to our ancient liberties we speak, however few or many may listen.  We run the risk of sounding like cranks or naively grandiose, yet the alternatives seem less appealing to us.  The little understood or little appreciated article is our forte, we pride ourselves on commenting on what much of the blogsphere, right or left, ignores.  Yesterday, for instance, while the MSM and blogsphere was focused quite intently on Mme Couillard's considerable physical assets, and famously bad taste in men, we noted attempts by all three Quebec provincial parties to bend the already authoritarian powers of the CRTC to their collectivist ends.  Today more statist arrogance presents itself, this time in the form of a federal Competition Bureau announcement: Villains have been at work in Quebec's retail gasoline industry.

The Competition Bureau announced that criminal charges have been laid today against 13 individuals and 11 companies accused of fixing the price of gasoline at the pump in Victoriaville, Thetford Mines, Magog and Sherbrooke.

Of the accused, three companies and an individual pleaded guilty today in the Quebec Superior Court in Victoriaville for their part in criminal conspiracies to fix the price of gasoline in one or more of these communities.

The Court has imposed fines totalling just over $2 million against the companies which pleaded guilty. The companies are: Les Pétroles Therrien Inc, operating under the Petro-T banner, and Distributions Pétrolières Therrien Inc. ($179,000), and Ultramar Ltée. ($1,850,000). One individual, Jacques Ouellet, an employee of Ultramar Ltée, also pleaded guilty and was fined $50,000.

The Competition Bureau’s investigation into potential price-fixing in the retail gasoline market continues in other markets in Canada.

“Today’s announcement sends a clear message that the Competition Bureau will take action against price-fixers when it uncovers evidence that they have broken the law,” said Sheridan Scott, Commissioner of Competition. “Price-fixing deprives consumers of the benefits of competition, such as a lower price.”

Today’s criminal charges and guilty pleas are the result of an extensive Bureau investigation that found evidence that gas retailers or their representatives in the markets phoned each other and agreed on the price they would charge customers for gasoline. The evidence suggests that the overwhelming majority of gasoline retailers in these markets participated in the cartel.

High gasoline prices and a precarious minority government, somethings are just too predictable.  The kicker, that rare moment that transforms this banal press release into a work of ironic beauty, follows below:

The Competition Bureau used several investigative tools in this case, including wiretaps and searches, as well as its Immunity Program. Under this Program, the first party to disclose to the Competition Bureau an offense not yet detected or to provide evidence leading to the filing of charges may receive immunity from the Director of Public Prosecution of Canada as long as the party co-operates with the Bureau.

In this little paragraph we see the futility of the whole endeavor.  As the press release notes earlier on it is very difficult to prove price-fixing, a mere coincidence of prices isn't enough.  There needs to be a fink on the inside to give it away.  That's the point, price-fixing, an attempt to establish a cartel, is ultimately futile because cartels are inherently unstable, because the person or corporation who profits most from a cartel is the fink.  In a cartel, or price fixing agreement, members will agree to set a specific price for a certain good or service either for a period of time or indefinitely.  The term cartel tends to include more subtle methods of influencing price as well, such as limiting output (either individually or collectively). 

The problem with cartels is that by attempting to raise the market clearing price above its "natural" level, it creates a tremendous incentive to cheat on the pricing agreement.  If everyone in an industry is selling for x an individual can clean up by charging, say, x - 10%.  Witness the constant cheating undertaken by members of the world's most famous cartel, OPEC.  Yet OPEC is a more stable cartel then those that have been attempted in a relatively free market environment.  Members of OPEC are not, like private companies, profit maximizers.  It may suit their political ends to raise or lower oil production at a given time - such as during the Yom Kippur War in 1973.  The irony, then, is great of the Competition Bureau trying to stop cartels by using exactly the same principle that makes these agreements futile in practice in the long run.  By the time the government has caught onto a cartel it has probably already collapsed, an interesting parallel to this can be found in the American Anti-Trust persecutions.  In one famous incident, IBM was charged with thwarting "free" competition by refusing to more cheaply license the use of a key electronic component.  By the time the case came to trial, and was resolved some thirteen years later, the component in question was a museum piece and Big Blue's market share was under sustained attack by the PC revolution of the 1980s.

Matching the impracticality of government intervention is its philosophical absurdity.  By fighting price fixing the government, in effect, is forcing participants in the gasoline industry to have a "free" market.  In insisting on creating a "free" or "competitive" market the state is effectively trying to dictate what it views as an ideal world and making the real world conform to it.  A "fixed" price might very well also be a market price.  A group of companies might seek to set an industry standard for a particular product by lowering or increasing the price of that product.  Let's say that a group of private companies, in the retail gasoline industry, were able to establish a cartel fixed price at something above the current market rate.  A legal document would be drawn up that could be enforced by the courts, though the state would not prevent new entrants into the industry - only the current members of the industry would be bound by the agreement.  The temptation to cheat would be considerably curbed by the potential of civil liabilities for breach of contract. 

Why would the industry seek to fix prices, aside from the obvious reason of boosting profits from selling gas?  Perhaps gas is beside the point.  Look at a modern gas station; the car washes, mechanics and convenience stores that now come attached.  Gas is just the excuse that gets you in the door, the real margins are in the affiliated products.  By fixing gas prices the gas companies make it easier for the consumer to shop: Rather than hunting around for that fraction of a cent cheaper on bronze unleaded, you're getting the same thing for the same price everywhere.  The competition would take place in the additional services provided by these "super" stations.  If consumers didn't like this fixed price approach they would readily embrace new entrants into the field who didn't abide by the agreements.  The entry of new firms into the industry would be facilitated by a written, legally enforceable cartel agreement; it would allow these new firms - and their backers - to plan ahead and invest.  Secret illegal agreements, make it harder for new entrants to break in because they cannot plan long term based on a cartel breaking strategy.

Price fixing is not "anti-competitive" if a better product and service is being offered as a result.  If the fixed price is something consumers don't want, others will be willing to supply the need.  For centuries walking into a retail store meant, like a modern car dealership, the prospect of haggling, quite literally, over every nickel and dime.  The brilliant success of F. W. Woolworth in 19th century America rested largely on providing no haggle prices for his customers.  The marketplace is dynamic, it can't be captured or forced to adhere to some arbitrary ideal of what the state considers to be a market.  The best way to help consumers in the Quebec gas market is to follow the advice of M. Le Gendre, Laissez-Nous Faire.