Visy Amcor Cartel
Student number 3406251 WANG QI
Visy Amcor Cartel: Report on Strategic Market Behaviour
With the information providd, a report about Amcor and Visy case is illustrated.
Market structure
Based on the given case, the market structure is oligopoly. According to (C. Bajada, J. Jackson, R. McIver & E.Wilson2012), characteristics of an oligopoly include the following aspects: fewness of the firms in certain industry, concentration ratio, and highly interdependence on each other. Whenever a firm makes a move about its price or production changing, it should seriously consider the counteraction or its rival‟s as is pointed by Colander David (2002). As is implied in the case, Amcor and Visy take control of about 90 per cent of the market, which …show more content…
In the first place, as is argued by (C. Bajada, J. Jackson, R. McIver & E. Wilson 2012), an oligopoly market is similar to monopoly in terms of product inefficiency and allocation inefficiency. If Amcor and Visy set a fixed high price and maintain their market share, there might be limited output. The price will exceed the marginal cost. Consequently, there would not be enough products to satisfy demand; therefore, buyers have to surrender to a high price and the market power is abused according to. As a result of collusion, clients in business with Amcor and Visy are over charged, causing loss to a large number of companies, and eventually, customers are charged at a higher price than they would have paid in a competitive market. Secondly, since the two major companies raise the price, other firms in the same industry may also choose to do so. Some of the new enters may expand market share, as …show more content…
Amcor‟s motivation is to be discussed later in the following paragraph. According to Andrew Main (2011), Amcor was offered immunity under ACCC‟s policy. Due to the damage the Cartel had brought to about 4500 business, both companies were fined. Amcor was fined 63.3 million, and Visy was fined 31.7 million. In addition, Andrew Main (2011) noted that both Amcor and Visy had to undertake a legal cost which had not yet been determined. The reason why Amcor confesses is likely to be its loss of confidence of the confidentiality in Cartel with Visy. As pointed by (Nick McHugh, Partner and Professor Warren Pengilley 2008), Cartel members can never be sure of the status of their confidentiality. Besides, ACCC gives immunity to Cartel member who first confesses the conduct, thus the side who intends to breach Cartel for an exchange of immunity would be encouraged to do so.
End of Collusion
In spite of the punishment on Amcor and Visy, there is less chance for other companies to stop colluding. Because as long as the company is profit-seeking, it makes hard endeavor to gain profit. As (Nick McHugh, Partner & Professor Warren Pengilley 2008) noted, the profit brought by collusion is immense while the probability of getting caught is slight. A company can gain profit either through product development and technology improvement to lower the cost, or through immoral
Visy Amcor Cartel: Report on Strategic Market Behaviour
With the information providd, a report about Amcor and Visy case is illustrated.
Market structure
Based on the given case, the market structure is oligopoly. According to (C. Bajada, J. Jackson, R. McIver & E.Wilson2012), characteristics of an oligopoly include the following aspects: fewness of the firms in certain industry, concentration ratio, and highly interdependence on each other. Whenever a firm makes a move about its price or production changing, it should seriously consider the counteraction or its rival‟s as is pointed by Colander David (2002). As is implied in the case, Amcor and Visy take control of about 90 per cent of the market, which …show more content…
In the first place, as is argued by (C. Bajada, J. Jackson, R. McIver & E. Wilson 2012), an oligopoly market is similar to monopoly in terms of product inefficiency and allocation inefficiency. If Amcor and Visy set a fixed high price and maintain their market share, there might be limited output. The price will exceed the marginal cost. Consequently, there would not be enough products to satisfy demand; therefore, buyers have to surrender to a high price and the market power is abused according to. As a result of collusion, clients in business with Amcor and Visy are over charged, causing loss to a large number of companies, and eventually, customers are charged at a higher price than they would have paid in a competitive market. Secondly, since the two major companies raise the price, other firms in the same industry may also choose to do so. Some of the new enters may expand market share, as …show more content…
Amcor‟s motivation is to be discussed later in the following paragraph. According to Andrew Main (2011), Amcor was offered immunity under ACCC‟s policy. Due to the damage the Cartel had brought to about 4500 business, both companies were fined. Amcor was fined 63.3 million, and Visy was fined 31.7 million. In addition, Andrew Main (2011) noted that both Amcor and Visy had to undertake a legal cost which had not yet been determined. The reason why Amcor confesses is likely to be its loss of confidence of the confidentiality in Cartel with Visy. As pointed by (Nick McHugh, Partner and Professor Warren Pengilley 2008), Cartel members can never be sure of the status of their confidentiality. Besides, ACCC gives immunity to Cartel member who first confesses the conduct, thus the side who intends to breach Cartel for an exchange of immunity would be encouraged to do so.
End of Collusion
In spite of the punishment on Amcor and Visy, there is less chance for other companies to stop colluding. Because as long as the company is profit-seeking, it makes hard endeavor to gain profit. As (Nick McHugh, Partner & Professor Warren Pengilley 2008) noted, the profit brought by collusion is immense while the probability of getting caught is slight. A company can gain profit either through product development and technology improvement to lower the cost, or through immoral