Final answer:
Colgate, as part of the toothpaste industry, can be impacted by shifts away from perfect competition towards oligopolistic practices. When Colgate and other firms engage in price-setting and market division, they face legal consequences for defying antitrust laws, as seen with the French laundry detergent market. Such practices alter long-run market equilibrium and can lead to unstable agreements among competitors.
Step-by-step explanation:
When considering the market dynamics of the toothpaste industry where Colgate operates, and similar markets such as laundry detergent and bagged ice, it's important to examine the competitive environment. Markets that are in long-run equilibrium are typically characterized by the entry and exit of firms, where all firms are making normal profits, and there is no incentive for additional firms to enter or leave the market. However, when firms like Colgate engage in practices to reduce competition, such as secret meetings or agreements to set prices and carve up markets, they shift from a model of perfect competition to one resembling an oligopoly or monopoly.
In the instances reported, Colgate-Palmolive, along with other major players in the laundry detergent market, secretly met to control prices and limit competition, defying the law. Such actions led to significant fines by French antitrust authorities and illustrated the temptations firms face in pursuing higher profits at the expense of competitive practices. This market manipulation results in a tenuous, unstable relationship between the participating companies and often ends with the disintegration of these unlawful agreements due to internal pressures to maximize individual profits.