"as serious as rigging Libor"
May 16, 2013 6:39 AM   Subscribe

Retail prices 'rigged for a decade': The European offices of BP and Shell were raided by European officials earlier this week in the beginning of an investigation into allegations of illegal market collusion and price fixing dating back to at least 2002.

More here from HuffPo's UK edition.
posted by saulgoodman (59 comments total) 21 users marked this as a favorite
 
I cannot say that I'm surprised by this. And don't think it's not happening on this side of the shore either, just no one has found it out yet.
posted by deezil at 6:44 AM on May 16, 2013 [2 favorites]


The unravelling of the commodities bubble continues apace! Let's see, we've had unexpected market declines, followed by fraud investigations now that the good times are over... government bailouts of the big players are probably next. Oh, yeah, and a freefall that will ruin a ton of small investors who believed the "safe haven" hype.
posted by Slap*Happy at 6:44 AM on May 16, 2013 [3 favorites]


Huge fines that go right into the government coffers. The motorist will see a price increase to cover these fines.
posted by Old'n'Busted at 6:44 AM on May 16, 2013 [8 favorites]


Based on prior experience, those huge fines might amount to almost a whole *week* of profits.
posted by absalom at 6:48 AM on May 16, 2013 [7 favorites]


Old'n'Busted, here in the Netherlands taxes account for 70% of the total price of petrol, so maybe they could lower the taxes ?
posted by Pendragon at 6:50 AM on May 16, 2013


Oh look, Citi's former head of commodities trading lives in a fuckin' castle. Things That Make You Go Hmmm.
posted by Damienmce at 6:51 AM on May 16, 2013 [1 favorite]


They have monopoly power. The way it works in practice is they have consultants who do things like conduct salary surveys and price surveys and whatnot who work for all the big players and they report on what the competitive numbers are while conferring with legal consultants who advise them how to stay a milimeter on this side of the relevant anti-anti-competition statutes. There are book length laws on this shit. They know as well as possible what the laws are. They spend a lot of time and money and effort doing a tippy toe dance to stay legal.
posted by bukvich at 6:52 AM on May 16, 2013


But... but... we already subsidise carbon! We tax the sale of it, then give trillions of the tax money back to industry in the form of resource rights, rights-of-way, and passing custom laws just for them... what else do we have to do?
posted by seanmpuckett at 6:56 AM on May 16, 2013


Snarking aside, this so definitely happened based on my own experience, while you would get some douches in fx, I found commodities guys to be all douches.
posted by Damienmce at 6:56 AM on May 16, 2013


Capitalists love quoting Milton Friedman, especially this bit of whimsy: "There is one and only one social responsibility of business–to use it resources and engage in activities designed to increase its profits."

But that's not the whole quote. They never use the whole quote. The whole thing is:

“There is one and only one social responsibility of business–to use it resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud”

Even an amoral monster like Milton Friedman knew that the system was busted once competition was removed. But what we're seeing now is just that, cartels just taking turns slicing the pie for each other and picking the first piece. When called on it, they either pay fines that they've already calculated into their budgets as the price of doing business or they whine that technically they didn't break any rules.

There are no real threats to them anymore, and if they didn't know it before, 2008-2009 demonstrated it quite plainly. Western civilization worships nothing as much as money, and its temples and priests will not be questioned or denied.
posted by Legomancer at 6:56 AM on May 16, 2013 [51 favorites]


Oh, right. We could die en-masse, to reduce traffic on the highways and crowding at the vacation hot-spots.
posted by seanmpuckett at 6:57 AM on May 16, 2013


I'm looking forward to the regulation-as-punishment of the gas and oil industries akin to what we saw from the tobacco advertising world of the past.

There is no rational reason why a handful of corporations are allowed to have outright profit in the billions per quarter, while entire governments are crashing due to lack of funds, or worse, while actual human beings go hungry (or worse) due to economic collapse.
posted by Blue_Villain at 6:59 AM on May 16, 2013 [3 favorites]


This is my surprised face.
posted by Sticherbeast at 7:04 AM on May 16, 2013 [2 favorites]


why a handful of corporations are allowed to have outright profit in the billions per quarter

Point of note, when people talk of the evil profits of The Banks! or Oil Companies! and Bonuses! etc is that while the execs are hugely, outrageously, well paid the companies are owned mostly by pension funds due to their regular, healthy dividends. These outrageous profits are mostly going to our parents.
posted by Damienmce at 7:04 AM on May 16, 2013 [7 favorites]


And now I would like you to imagine this happening in America.

I'll wait.
posted by unSane at 7:09 AM on May 16, 2013


These outrageous profits are mostly going to our parents.
Perhaps I'm missing something... and I sure I am because both of my parents work for banks but neither of them own a yacht, a castle, or even a second car. My dad does own an RV though, but he bought it used off of Craig's List. So I'm a little perplexed as to where or how all of this not-for-the-benefit-of-mankind-profit is reaching anything other than the owner/controllers of industry.
posted by Blue_Villain at 7:15 AM on May 16, 2013 [3 favorites]


Obviously, the oil companies were raising the price of petrol to reduce demand, and therefore mitigate carbon emissions. Obviously. Given that international climate policies have largely failed, these crusaders risked investigation and potential sanction to act on behalf of all us, and forcibly reduce fossil fuel consumption. Here we thought they were the bad ones, when they've been so honourably protecting us from ourselves.

And the outsized profits earned? That is their reasonable fee for helping secure the destiny of humanity. What wonderful fellows.
posted by nickrussell at 7:15 AM on May 16, 2013 [3 favorites]


I'm shocked, shocked to find that price fixing is going on in the oil industry.
posted by Golden Eternity at 7:17 AM on May 16, 2013 [6 favorites]


I share your shock and amazement. Who ever would have guessed.
posted by Mary Ellen Carter at 7:19 AM on May 16, 2013 [1 favorite]


I absolutely cannot believe this ever would have happened. [/sarcasm]
posted by trogdole at 7:20 AM on May 16, 2013


The only positive thing about these investigations is that they tarnish the already soiled image of Big Oil, hopefully making people more susceptible to green energy initiatives. Unless, of course, the CxOs involved get jail time but that's as likely as CERN finding out that the Higgs Boson has been living as a cabaret artist in Paris all these years.
posted by Foci for Analysis at 7:25 AM on May 16, 2013 [2 favorites]


CERN finding out that the Higgs Boson has been living as a cabaret artist in Paris all these years.

Awesome... that's a Dan Brown novel...
posted by nickrussell at 7:26 AM on May 16, 2013


That MP who mentioned "millions" in files just shows his innumeracy. Billions of dollars were made (they had to to be, otherwise this wasn't worth it) and a fine of less than the profit acquired is simply a cost of doing business.
posted by pmb at 7:27 AM on May 16, 2013 [8 favorites]


Having government investigate big business is like having the wolf investigate the fox after that hen slaughter.
posted by HuronBob at 7:31 AM on May 16, 2013 [1 favorite]


Zero surprise. Is ANYONE honestly shocked when businesses (cos it sure as shit isn't just oil) conspire / collude/ tacitly work together to crush true market competition? The people who run such companies do so for the purpose of making money. Many will do whatever they can get away with to that end.
posted by genuinely curious at 7:31 AM on May 16, 2013 [1 favorite]


Reading the Grauniad article on this and just had to stop a moment to share this:
Lord Oakeshott, former Liberal Democrat Treasury spokesman, said the alleged rigging of oil prices was "as serious as rigging Libor" – which led to banks being fined hundreds of millions of pounds.
Emphasis mine. Any relation to the Lord Oakeshott from the Skyrim Herb Pricing Collusion side quest?
posted by notyou at 7:32 AM on May 16, 2013


Slap*Happy - Let's see, we've had unexpected market declines, followed by fraud investigations now that the good times are over... government bailouts of the big players are probably next.

You should play the lottery:

BP to seek Cameron's help as oil spill costs escalate
BP wants Prime Minister David Cameron to intervene over the escalating cost of compensating US companies for the Gulf of Mexico oil disaster in 2010
posted by metaBugs at 7:34 AM on May 16, 2013


There is no rational reason why a handful of corporations are allowed to have outright profit in the billions per quarter, while entire governments are crashing due to lack of funds

What if neither the handful of Corporations or entire governments as they are being run are worthy of support?

actual human beings go hungry (or worse) due to economic collapse.

I'd go find the US links to people being fined by local US based governments for growing food but instead you can go read about the EU and seed saving.

And in some US states it is illegal to save water - so how are you going to grow the food to avoid hunger in those locations without water?
posted by rough ashlar at 7:35 AM on May 16, 2013 [1 favorite]


Having government investigate big business is like having the wolf investigate the fox after that hen slaughter.

At least they are not eating the chickens at the same table surrounded by sheep, right?
posted by rough ashlar at 7:37 AM on May 16, 2013


BP wants Prime Minister David Cameron to intervene over the escalating cost of compensating US companies for the Gulf of Mexico oil disaster

The citizens of the UK want Prime Minister David Cameron's help over the escalating cost of compensating UK companies for the ongoing disaster that is the UK economy.
posted by nickrussell at 7:40 AM on May 16, 2013 [4 favorites]




Always relevant. Unfortunately.
posted by genuinely curious at 7:41 AM on May 16, 2013


Well, hell. I'm not particularly surprised, though of course it's a pisser. That said, it's only illegal, and the level of enforcement seems lately to be largely determined by the largest purse. I wonder where the tipping point is on the level of inconvenience the majority is willing to put up with before they begin sharpening their pitchforks.
posted by Mooski at 7:43 AM on May 16, 2013


I'm looking forward to the regulation-as-punishment of the gas and oil industries akin to what we saw from the tobacco advertising world of the past.

Given that exactly 0 of the people responsible for intentionally crashing the world economy in 2008 served so much as a single day in jail on either side of the Atlantic, they were showered with unending government largess rather than investigations, it's wildly optimistic to think that widespread fraud in the financial sector will be prosecuted ever again. The savings and loans crisis 80s-style round-ups are not coming back, the relationship between western governments and mega-corporations has changed as the public interest has increasingly been refefined as solely the interests of megacorps. It's much more likely that whatever wrongdoing went on will be retroactively legalized, if it ever manages to come out into the open despite vigrous government-aided coverups.
posted by T.D. Strange at 8:08 AM on May 16, 2013 [7 favorites]


...and a bunch of people are going to whine & complain and do exactly zero about it.
posted by aramaic at 8:30 AM on May 16, 2013 [1 favorite]


both of my parents work for banks but neither of them own a yacht, a castle, or even a second car

Do they have pensions of any kind? Californian teachers profit more from price rigging than big oil executives, not per head obviously but as a group certainly. Norwegian pensioners own 1% of everything.My point is profits aren't in of themselves that meaningful or hugely damaging, they usually work their way through the system to normal Joes. Not to the same extent of oil cos where Government owned but because they're privately owned it doesn't mean the cash disappears into some kind of blackhole never to be seen again.
We should be outraged at the % the companies are paying their execs not that they're making huge profits. Profit isn't a bad thing. How the profit is made is a can be a bad thing, be it priced rigging,pushing loans to people who can't afford them or collecting orphan tears.
posted by Damienmce at 9:06 AM on May 16, 2013 [2 favorites]


Do they have pensions of any kind? Californian teachers profit more from price rigging than big oil executives, not per head obviously but as a group certainly. Norwegian pensioners own 1% of everything.

Sorry, that's like saying it's OK to steal a dollar if you give a penny to the poor.
posted by CheeseDigestsAll at 9:25 AM on May 16, 2013 [5 favorites]


My point is profits aren't in of themselves that meaningful or hugely damaging, they usually work their way through the system to normal Joes.

One can make a business that would be profitable not make a profit by paying the leadership very large sums of money.

This "system" of getting to "Joes" you are thinking of - does it pass the lips, into the stomach, get metafiltered by kidneys and come out in a golden trickle of prosperity?
posted by rough ashlar at 9:27 AM on May 16, 2013


Sorry, that's like saying it's OK to steal a dollar if you give a penny to the poor.

No. The point being made is that the profits accrue to the owners of these businesses; if they are freely traded, those owners are the stockholders. Some of the very largest stockholders are things like pension funds.
posted by samofidelis at 9:38 AM on May 16, 2013 [1 favorite]


I'm sorry, but we can't allow corporations to take the elderly hostage in order to get out of their social obligations.
posted by Slap*Happy at 9:48 AM on May 16, 2013 [3 favorites]


And that argument ignores the fact that the concentration of money matters in practice. Profits returned to investors through pensions in volumes of pennies per person don't confer as much economic decision-making power as the proportionally massive returns to executives in the form of large bonuses and commissions. So the incentives for constant short-term increases in profits are primarily for the benefit of execs, who in turn command more economic decision-making and political power generally. And as has been discussed previously, shareholders in pensions are mostly owners in name only, usually delegating their votes to money managers as proxies--not that many shareholder votes are even binding anyway.
posted by saulgoodman at 9:52 AM on May 16, 2013


The point being made is that the profits accrue to the owners of these businesses.

That still doesn't justify price rigging. Plus, companies aren't that great at returning profits. Currently the S&P 500 is averaging about a 2% return, and ridiculous salaries and bonuses are all paid first, so they come out of any potential profit seen by the investors.
posted by CheeseDigestsAll at 9:55 AM on May 16, 2013


Lot of angry capitalists in this thread. You're right: you invest your hard-earned capital and your return gets squandered on wages! Damn those CEOs!
posted by alasdair at 10:24 AM on May 16, 2013


Blue_Villain:
These outrageous profits are mostly going to our parents.
Perhaps I'm missing something... and I sure I am because both of my parents work for banks but neither of them own a yacht, a castle, or even a second car.
You are. No one said, "Your parents are all individually making as much as the CEOs of these companies." What was said is reasonable, and true: most of the profit goes to investors, who number in the tens of millions.
posted by IAmBroom at 10:29 AM on May 16, 2013 [1 favorite]


If your parents are lucky, they can even use some of that sweet dividend money to fill up their gas tanks at a totally reasonable $4.75/gal.
posted by feloniousmonk at 10:49 AM on May 16, 2013 [3 favorites]


Approximately half price of petrol here in Norway, in other words.
posted by Harald74 at 10:55 AM on May 16, 2013


That MP who mentioned "millions" in files just shows his innumeracy. Billions of dollars were made (they had to to be, otherwise this wasn't worth it) and a fine of less than the profit acquired is simply a cost of doing business.

Every time lately that I read about a business getting fined for some unethical but highly profitable misbehavior it reads like Dr. Evil is running the worlds' business regulation agencies.."We'll fine them....ONE MILLION DOLLARS! bwahahahahaha!" I just don't understand why it's so hard to comprehend that the dollar amount of the fine needs to be MORE than the dollar amount of the profit or else you just shouldn't bother. Of course then we get into the shell games of companies hiding their profits, but at least it would be a step in the right direction...
posted by mstokes650 at 11:37 AM on May 16, 2013 [7 favorites]


I just don't understand why it's so hard to comprehend that the dollar amount of the fine needs to be MORE than the dollar amount of the profit or else you just shouldn't bother.

Always makes me think of this West Wing scene.
posted by metaBugs at 4:45 PM on May 16, 2013


God knows they'd burn easy enough.
posted by thsmchnekllsfascists at 6:22 PM on May 16, 2013


I just don't understand why it's so hard to comprehend that the dollar amount of the fine needs to be MORE than the dollar amount of the profit or else you just shouldn't bother.

Senator Elizabeth Warren made exactly that point in a letter (PDF) that she sent to regulators at the Fed, Justice Dept. and SEC.

"If large financial institutions can break the law and accumulate million in profits, and if they get caught, settle by paying out of those profits, they do not have much incentive to follow the law."

Warren is holding regulators feet to the fire and Wall Street really hates her for it.
posted by JackFlash at 6:34 PM on May 16, 2013 [1 favorite]






yeah seriously everytime I see the word "fined" and then a magnitude of dollars that does not start with the letter b, I just translate it to "ham sandwiches" instead because a million dollars has about as much import and relevance to the operations of a global commodities or financial company as a ham sandwich
posted by seanmpuckett at 7:05 PM on May 16, 2013 [1 favorite]


The number one way that I would like to see (pretty much all) fines rewritten is to change them from flat numbers to percentages. Get caught doing some shit like this? Five percent of your net, thank you please. That way the larger companies have no less an incentive to avoid it than smaller ones.
posted by klangklangston at 7:29 PM on May 16, 2013


If only the Koch brothers will be implicated and cast down for this. We can always dream.
posted by humanfont at 7:33 PM on May 16, 2013


Not derailing, but just last month Taibbi outed another rate fixing scandal that dwarfs LIBOR in dollar amount and fx, and no one even blinked. The story got no traction.
This experiment called "deregulation," can we just declare it a total failure already?
posted by Fupped Duck at 7:39 PM on May 16, 2013


at a totally reasonable $4.75/gal.

You mean a ridiculously, artificially-subsidized, in-no-way-encompassing-the-full-cost, low price of $4.75/gal?

Because for a minute there I thought you were complaining about the price of gas in America.
posted by Kadin2048 at 9:38 PM on May 16, 2013


relevance to the operations of a global commodities or financial company as a ham sandwich

One used to be able to get a Grand Jury to true bill a ham sandwich.
posted by rough ashlar at 12:35 AM on May 17, 2013


I am sure those who paid for deregulation are very happy with their purchase, and those who received the purchase price were also very happy. In the metrics of "people who matter today" it was a huge, huge win.

You and I are not involved in that transaction any more than children who used to play in a forest before it was logged are involved in that transaction and we're welcome to cry about it but no one really gives a shit.

The way to make change there is for the angry kids to grow up and buy the land the forest grew on and make our own decisions about trees.
posted by seanmpuckett at 6:21 AM on May 17, 2013




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