Antitrust: The High Cost of Price Fixing

When 29 of the nation’s electrical equipment manufacturers were convicted of criminal bid rigging and price fixing in 1961, the gates were opened to a flood of damage suits. Customers have brought almost 2,000 suits against the electrical companies in the past four years. Two-thirds of them have already been settled, almost all of them out of court. Last week a federal judge in Manhattan handed down the second largest court judgment against the electrical companies since the Great Conspiracy was uncovered. He ordered the General Electric Co. and the Westinghouse Electric Corp. to pay $16.8 million in damages to the Ohio Valley Electric Corp. and its subsidiary, Indiana-Kentucky Electric Corp., for overcharging on eleven steam-turbine generators that the two Midwest utilities purchased in 1952.

The cost of price fixing comes high. Under antitrust law, customers who can prove that they have been overcharged as a result of price fixing may collect damages worth three times the amount of the overcharge. So far, G.E. has paid out $225 million in claims, Allis-Chalmers $45 million. Westinghouse has set aside $110 million to cover its suits. Included in these totals: last year’s record $28.9 million court judgment against G.E., Westinghouse, Allis-Chalmers and three other manufacturers (TIME, June 12, 1964), which the companies later settled out of court for $18 million.

There are still 719 cases pending against the electrical companies, but G.E. and Westinghouse both say that most of their remaining suits are small. The two companies claim that they have already settled 99% of the dollar value of suits brought against them. G.E. stockholders have something more to cheer them up. Last year, because the company paid much of the damage claims out of current earnings, G.E.’s record earnings of $3.44 per share had to be adjusted to $2.62. This year the company will pay all claims from a special reserve fund that it says is ample to cover the remaining suits.