Case Study
Case Study 5: General Electric Prices
Clarence Burke began working for the heavy-equipment division of General Electric as soon as he graduated from college in 1926. Clarence was an energetic, hard-driving, and tenacious person and looked forward to a promising career at GE. The heavy electrical equipment division at GE was the oldest part of the company, around which the rest had been built, and it still accounted for a quarter of its sales. Moreover, GE dominated the heavy electrical equipment markets: It held 40 to 45 percent of the heavy equipment markets, followed by Westinghouse who held 30 to 35 percent, then Allis-Chalmers and Federal Pacific who held 10 percent apiece. By the 1950s, the combined sales of these companies would average $1,750,000,000 per year in the heavy electrical equipment markets alone.1
Long before Clarence Burke began working for GE, the company was involved in a series of antitrust suits that continued through the 1940s. These suits are summarized in Table 4.4. In November 1946, as a response to these suits, GE formulated an antitrust directive which stated that it "is the policy of this company to conform to the antitrust laws." The directive (which came to be known as "directive 20.5") was repeatedly revised and filled out until it eventually read:
Directive Policy on the Compliance by the Company and its Employees with the Antitrust Laws No. 20.5
It is the policy of the company to comply strictly in all respects with the antitrust laws. There shall be no exception to this policy nor shall it be compromised or qualified by any employee acting for or on behalf of the company. No employee shall enter into any understanding, agreement, plan, or scheme, express or implied, formal or informal, with any competitor, in regard to prices, terms or conditions of sale, production, distribution, territories, or customers; nor exchange or discuss with a competitor prices, terms, or conditions of sale, or any other competitive
Clarence Burke began working for the heavy-equipment division of General Electric as soon as he graduated from college in 1926. Clarence was an energetic, hard-driving, and tenacious person and looked forward to a promising career at GE. The heavy electrical equipment division at GE was the oldest part of the company, around which the rest had been built, and it still accounted for a quarter of its sales. Moreover, GE dominated the heavy electrical equipment markets: It held 40 to 45 percent of the heavy equipment markets, followed by Westinghouse who held 30 to 35 percent, then Allis-Chalmers and Federal Pacific who held 10 percent apiece. By the 1950s, the combined sales of these companies would average $1,750,000,000 per year in the heavy electrical equipment markets alone.1
Long before Clarence Burke began working for GE, the company was involved in a series of antitrust suits that continued through the 1940s. These suits are summarized in Table 4.4. In November 1946, as a response to these suits, GE formulated an antitrust directive which stated that it "is the policy of this company to conform to the antitrust laws." The directive (which came to be known as "directive 20.5") was repeatedly revised and filled out until it eventually read:
Directive Policy on the Compliance by the Company and its Employees with the Antitrust Laws No. 20.5
It is the policy of the company to comply strictly in all respects with the antitrust laws. There shall be no exception to this policy nor shall it be compromised or qualified by any employee acting for or on behalf of the company. No employee shall enter into any understanding, agreement, plan, or scheme, express or implied, formal or informal, with any competitor, in regard to prices, terms or conditions of sale, production, distribution, territories, or customers; nor exchange or discuss with a competitor prices, terms, or conditions of sale, or any other competitive