Question

In 2011 the European Commission determined that P G, Unilever, and Henkel conspired to set prices for laundry detergent. This is an example of _______.

1) Price fixing
2) Monopoly
3) Advertising
4) Competition

Answer 1

The conspiracy by Proctor & Gamble, Unilever, and Henkel to set laundry detergent prices in 2011 is an example of price fixing.

Step-by-step explanation:

In 2011, when the European Commission found that Proctor & Gamble, Unilever, and Henkel conspired to set prices for laundry detergent, it was an example of price fixing. Price fixing is a form of collusion in which companies that would otherwise be competitors agree on setting prices, limiting production, or dividing markets amongst themselves. This action goes against competitive practices and can violate antitrust laws. The detergent makers maintained this collusion to limit competition and create a semblance of stability, but such arrangements often fall apart due to individual incentives to cheat for greater profits. The situation described is not an example of a monopoly, where a single firm controls the market, nor is it mere advertising or competition in their lawful senses. Instead, it represents an illegal agreement amongst oligopolistic firms aiming to manipulate the market dynamics in their favor. During their covert meetings, the companies in the soap industry attempted to establish complex pricing structures to substitute competitive tension with an orchestrated strategy, which ultimately fell apart.