An article in Bloombergbusinessweek (February 15,2017) titled “Is the Chicken Industry Rigged” describes the increasing profits for chicken manufacturers and a lawsuit about possible coordination. The industry participants subscribe to an information sharing service, Agristats, owned by Eli Lilly, that provides data across the industry regarding individual plant details. The claim in the lawsuit is that such knowledge enables competitors to understand production rampup plans of each other, and thus coordinate actions without meeting. The class action lawsuit claims a resulting increase in prices from what they may have been. How much detail should the trade be permitted to share with each other to improve efficiency while not enabling collusion ? Should rational decisions from such shared data that improve profits be considered unacceptable or are they a portion of the efficiency benefits shared by the industry ? if, as the industry claims, prices went down during this period, is that evidence that such collusion did not take place ? Could prices have not gone down as much as feasible because of implicit coordination ?
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Global Supply Chain Musings 
It is difficult to make a conclusion whether the chicken price as a result of information sharing is low enough or not. But thinking of chicken industry where there are lots of manufactures with a relatively low entry barrier (I think), even though the manufactures make excessive profits by limiting productions based on information sharing, I think continuous additional profit will easily invite new players to the market and the price will go down accordingly. So in my opinion, the anticipated high or not-low-enough price is a kind of temporary condition and the supply chain coordination will eventually increase the total benefit in the entire supply chain.
This seems to be a cartel, where they use a loophole in law and share critical information which can tell future production, and make decisions to cut production to drive up prices to maximize profits, which is price manipulation. Data sharing in industry should in no way allow insight into future supply, data sharing should be encouraged for improving process efficiencies and technology improvements, but not about anything that can benefit the group by manipulating the price and output. Cartel practice is common where there are few players and entry is difficult. This rational decision based on solid data which tells about future production output is unacceptable as they are controlling supply to maintain higher prices, than what could be feasible, and company claiming prices going down is not an evidence that no collusion took place. There is clear coordination to keep the prices higher than feasible, and is similar to insider trading.
It was definitely interesting to read about how Jim Cox was able to work through college at Purdue and to stumble upon the industry. While the industry still thrives to this day, it’s a testament that the business has weathered through a few class action lawsuits. I do agree that it is definitely legal for Agri Stats to compile historical data in a meaningful way. However, this is mainly an ethical issue that is to be debated. While there is no form of collusion because the c-suite executives never met with one another and never discussed about controlling the chicken stock.
It might be difficult for regulatory to distinguish the rational decisions on efficiency improvement and the decisions solely for obtaining additional profit on top of the profit gained through efficiency improvement. Thus, the focus here should be verifying whether the claim that prices went down made by the manufacturers is true. As every technology may have potential side effect, in this case, enabling collusion, it could not be the sole reasons for us to rule out the application of the new technology. As long as the information sharing did improve the production efficiency and led prices went down which mean that the benefits of sharing the information outweigh the potential risk of collusion, such minor coordination may be tolerated even if the prices have not gone down as much as feasible.
From many simulation games we played in class, beer-game is the one I can relate to this case. Sharing strategic information within industry members would definitely benefit for the players in the range. The bullwhip effect will be alleviated, and players will make efficient contracts together. In this case, the problem locates in how much details should participants share with each other. I think that depends on both the perspectives of consumer acceptance and the profit space that an industry has. Coordination such as cartel must be prohibited with the intervention of authorities. However, the level of coordination still will be determined by the market. In my opinion, shared information can be a portion of efficient benefits for the industry, the only problem here is to avoid aggressive coordination which might have negative impact on consumers’ acceptance level. Also, price is not entirely based on the industry collusion. So, it is not appropriate to say that price is an indicator to see if players in the industry in a coordination status or not. Though coordination may have a little impact, other factors such as supply and demand, macro-economic situation also have impacts.
While it is not possible to understand what data was shared and if it resulted in different firms colluding, it is possible to say that sharing of data can significantly streamline supply and thus drive down prices. Rational decisions from the shared data that improve efficiency and thus profits, are good for not only the supply chain but also for consumers in general. If sharing the data is driving prices down for the consumers, then it’s a good result. Also, taking about the efficiency, Almost one-third of the food products produced in the world get spoilt or damaged due to inefficiencies in the food supply chain. The need of the hour is to streamline it and make it more efficient for two reasons which are far more important than short term profits- 1. Being able to feed the exponentially growing world population, which is expected to be around 9 billion by 2050. 2. To reduce wastage which inturn would reduce the carbon footprint and pollution (of any kind) that gets generated due to inefficiencies in the food supply chain. Further, just prices are not enough to show whether collusion occurred or not since they are dependent on many more variables.
In an integrated system, the flow of information is always advisable for higher efficiency and profit. Speculation, in this case, is that knowledge is being shared across the competitors, enabling them to regulate the price and get undue advantage over customers. But in some cases, companies like Patagonia and Tesla are working along with the competitors to bring the operational cost down, which eventually transcends into higher profitability for the companies and better products for the consumers. So sharing data, which in this case is not evident enough, is a dual-edged sword and should be dealt with the utmost care by the participating companies, but at the same time, the government should prohibit such activities with immediate intervention. However, the level of coordination should be determined by market conditions.
Also, the price fluctuations are not a direct result of collusion. A lot of other factors such as location, suppliers, and distribution channels play a huge impact in deciding the price of the product. Even if the companies are sharing operational data with each other, it is impossible to vary the price in the same fashion.
This case is very related with our coordiante game in several courses, even it is based on an online information sharing system and the coordiante between industury is “invisable”. To achieve the highest profit, coordinate with other to increase the selling price is almost a predictable way, especially with a industry-famous uniform information sharing system.
However, customers who buy chicken are usually price sensitive, and I am agreed with Han’s opinion that compatitors can enter this industry easily, a higher coordinate -based selling price setting may led a decrease of selling quantity and may not help these companies to achieve their profit goal.
There exists collusions or consortiums in many industries with the STAR Alliance in aviation being an example, where aviation giants formed an alliance to counter the growing bargaining power of suppliers- Boeing and Air bus. Even in Pharma, companies collaborate to share data but the answer lies in how historical the data is. If the data of recent months is visible, then many players can collude without even meeting but if data available data dates back to few years, then rational decisions can be made by observing trends and colluding or rigging becomes difficult.
The Industry’s claims that the prices went down do not prove that there was no collusion as it is possible to collude in a way so as to increase margins even after reducing prices. Moreover, there could always be the case that the prices may have dropped even further and that the companies may have colluded to stem the drop.
There is a fine line between data sharing for process improvement and data being misused for personal business gains. In this case we need to verify if the prices going down are directly linked to data sharing or there could be various other factors involved as well.
Using data to make rational decisions which would improve processes and increase profitability are acceptable provided it is not used with an ulterior motive. However, the fact that all the information is available out there gives competitors a chance to get into the market easily and only provides better service for the customer.
In order to avoid such confusion, it may be required that an authority board looks into it and decides to what extent information can be shared in this matter.
Actually this is different from Cournot Duopoly model, not like Coca-cola and Pepsi, in this chicken industry, there are many competitiors. Because of that, if there were price conspiracy between some competitiors, others will have motivation to lower their price and get more market share. As for this implicit coordination, there should have some companies who have strong bargaining power.
For regulatory authorities, there should be some restrictions to avoid conspiracy in some industries, without that, the companies who have strong bargaining power can make great profit easily while the customers have no choice buy to follow.
To make the whole revenue bigger is specific for supply chain, instead of for one industry. In one supply chain, the companies are from different industries, with information sharing, the competitive strength get stronger, which is both benefit for the supply chain and customers. That’s the reason we encourage integrate supply chain.
According to the supply chain theory, the more information you share, the more profit the whole chain achieve. But when you share more information, you will face more risks. How much detail should the company set will be determined by the different categories. Company need a method to classify their data and information according to the importance and complexity. We can share the data which is not very importance but complexity which can reduce their partner work or make their partners more updated.
It is a good method to increase whole chain profits. We can found if we combine two or more company together in the vertical side, we will share the risks and make more order to increase the whole chain profit.
No, price will be affected by multiple factors. The decrease of price is not a sufficient evidence for defect of information sharing.
Yes, because even if we share information to our partner which means we have higher order quantity, we still face the risks of information publication which also cost us. Therefore, one company’s profit in the whole chain maybe not increase.
According to the supply chain theory, the more information you share, the more profit the whole chain achieve. But when you share more information, you will face more risks. How much detail should the company set will be determined by the different categories. Company need a method to classify their data and information according to the importance and complexity. We can share the data which is not very importance but complexity which can reduce their partner work or make their partners more updated.
It is a good method to increase whole chain profits. We can found if we combine two or more company together in the vertical side, we will share the risks and make more order to increase the whole chain profit.
No, price will be affected by multiple factors. The decrease of price is not a sufficient evidence for defect of information sharing.
Yes, because even if we share information to our partner which means we have higher order quantity, we still face the risks of information publication which also cost us. Therefore, one company’s profit in the whole chain maybe not increase.
According to the supply chain theory, the more information you share, the more profit the whole chain achieve. But when you share more information, you will face more risks. How much detail should the company set will be determined by the different categories. Company need a method to classify their data and information according to the importance and complexity. We can share the data which is not very importance but complexity which can reduce their partner work or make their partners more updated.
It is a good method to increase whole chain profits. We can found if we combine two or more company together in the vertical side, we will share the risks and make more order to increase the whole chain profit.
No, price will be affected by multiple factors. The decrease of price is not a sufficient evidence for defect of information sharing.
Yes, because even if we share information to our partner which means we have higher order quantity, we still face the risks of information publication which also cost us. Therefore, one company’s profit in the whole chain maybe not increase. .
Data sharing can help the entire supply chain to make more profit to a certain extent. Suppliers and retailers can coordinate negotiations through transparent data to reduce cost outflows. At the same time, data collaboration helps to help suppliers coordinate production and planning, based on more solid market data. However, it is difficult to exclude changes in non-market adjustments, such as improper price adjustments. Moreover, the threshold for suppliers is very low, and the pricing of new suppliers will also bring fluctuations in the market, which are unrecognizable by data sharing.
Information sharing is an important aspect of supply chain management, and sufficient information sharing is an important factor for the successful operation of the supply chain. It can help increase the channel transparency of the supply chain, achieve the coordination and cooperation with partners, and bring more profits for the whole chain to be shared. However, the range of shared information needs to be explicitly regulated. The provider of the information must ensure that the confidential information of the factory cannot be stolen by any illegal approaches. There needs to be a consensus that the target of acquiring effective shared information is to increase own profit which comes from the collaboration of the supply chain without hurting the benefits of the consumer at the same time. Sharing information is a well-intentioned activity to facilitate healthy competition, but it cannot be used by someone who is willing to manipulate industry prices, which condition we need to avoid.
The drone can help with efficiency and accuracy of shared information but may not do some much good to workers behavior. The problem of waste is caused partly by lack of information synchronization. The main problem is still the management on construction site. However this real time synchronization really helps to improve efficiency of the whole supply chain management.
sorry. i opened two blogs at the same time. this one is for another blog.
I have myself worked in the chemicals (fertilizers) manufacturing industry where information sharing is fairly common. Many other industries like aviation and pharmaceuticals openly share data and such is the norm in most manufacturing industries. The point is that collusion is necessary and unavoidable in manufacturing, it is only the extent that is questionable and must be monitored. In India, the prices of fertilizers are monitored by the government. Information sharing for better efficiency is healthy as long as the end consumer doesn’t pay higher prices. Thus, the extent of sharing must be monitored, or at least, the outcome should be controlled. Whether the prices must not have gone down to the extent that is claimed is difficult to answer. However, the lowering of prices during the period can be a result of external factors that may have nothing to do with co-ordination. It does not disprove any co-ordination.
whether it’s a collusion or cooperation depends whether they act together to block new entrants of this industry or try to form a cartel or syndicate. Lack of information sharing would cause the whole supply chain efficiency decreasing and waste resources. That’s why different parts on the supply chain should cooperate with each other thus increase feasible service level, making the whole pie bigger for everyone. However, if it forms some kind of monopoly, in short term people would see some price reduction. Eventually it would fall into low efficiency and customers would pay for it.
The actions and claims resulting from this case is not surprising to me. The foundation our economy is built on is that rational participants will seek to maximize their own utility. If it was in the best interest of the company to use that information for monetary gain, they will do it. I believe an option that might curb some of the extreme coordination behavior would be to generalize or make buckets in which to report the data (numerical values could be a range and demographic data could fall into regional zones). There is a trade off between efficiency and coordination behavior. If all the information would be shared, only the most efficient company would survive in the long run (can produce at the lowest marginal cost). I don’t believe you can justify coordination based solely off prices; companies actions and timing of those actions would best determine coordinating behavior (a company can gouge the market with low prices or coordinate with others to raise the price).
In my opinion, the data sharing between the players are meant to be for co-ordination and the ultimate benefit of doing so it to decrease the supply chain cost. The cost savings are then transferred to customers as low prices. If we start questioning all such data sharing options, we will not reap the benefit of coordination.
To be honest, I think to the extent that the companies are comfortably willing to share out detailed information, it shouldn’t be considered unacceptable, even without Agri Stats as the platform of company information exchange across the industry, there is no way to guarantee that there would be no under the table talks amongst themselves. While healthy competition and coordination could also be facilitated with the share of information, the information could definitely be used in a unethical way but it is difficult to prove and avoid.
There could be other actions plans to alleviate collusion to surge sales price:
1) Consumer or channels of sale may boycott brands that have surged their price unreasonably.
2) Government may also encourage the emerging of new entrants (I agree the point that Han mentioned, the entry-barrier for poultry may be low) and with the help of certain new regulations, tax benefit, or subsidy to the original chicken farmers that were outsourced by the huge market players, may also help to dilute huge player’s market price influence.
3) Origin to market platform may be set up and encourage direct from origin sales from chicken farmers for unprocessed meat.
Sharing information across different members within the same industry will benefit everyone. However, the level of data shared among the parties to improve efficiency will depend on either party’s influential / monetary power or the content of the data they are having. Data sharing is acceptable until and unless the data shared is not used in an unethical way, and there is a negative impact on the consumers’. Prices could go up and prices could go down for different reasons such as increase in the cost of supply chain, or increase in cost of raising the chickens, or the prices could go down if consumers move from to chicken to another animal meat.
It is an undeniable proven fact that data is more valuable than oil in this era. As the lawyer hired by the firm dismissing the motion in the article suggests – as long it is history , we are okay – this conveys an interesting detail about the data sharing industries currently flourishing that they all depend on historical data to analyse the future, which in today’s data driven generation is rightfully true.
One of the major reasons of bull whip effect is demand forecast inaccuracies, which can be countered mainly by information sharing. The company in question ‘Agristats’ only conveys the historic data to its subscribers and conveys the patterns and trends thus generated, nevertheless, the ultimate responsibility lies in the subscribing companies to use these trends wisely. It is unethical if coordinated efforts of all the companies in the industry using such data regularize itself into a cartel to mint money out of consumers, but the same is not been proven in the article against the companies in question. However, as history suggests, competition would always emerge to break such coordinated efforts, and this collusion would not prolong.
Saying so, fluctuation of prices could be because of umpteen reasons, not just because of alleged coordination. Putting the data sharing services under spotlight for this activity is not fair. Data technology that showcase trends and help companies make profits are here to stay, saying so it has its own downside as well – as could be seen in the recent lawsuit of a Social media giant for information sharing of its subscribers. Not deviating from the context, the food data company have a large responsibility in hand – to feed the ever hungry and increasing population and minimizing the dissipation of food- and thus by providing the real time data they are thoughtfully bringing a positive change.
Collusion by companies in an industry is against free-market principles. It doesn’t benefit the end consumer. Free market competition helps the consumer get the best product for the best price. The collusion of these poultry farms is somewhat similar to the oil cartel of OPEC countries. Both these groups are able to circumvent the Sherman antitrust laws through loopholes. OPEC is not covered by the act because it’s not an American organization, but Agristats and its participating companies are and yet they are not under the purview of the SEC or regulatory bodies for malpractices.
Sharing data among companies in the same industry can be done but it needs to be verified to ensure no malpractices happen. It applies similarly to the extent of information shared. If the companies are able to predict what their competitors are going to do in the coming months then a possible implicit collision can occur. The end result is similar to a price-fixing scenario. There is a fine line between using this data for collusion and improving efficiency. Regulatory bodies should review long term data and decisions that can help determine the verdict in the cases filed.
Agri Stats is not the only company out there that living off of collecting data from others. Most shopping website, if not all, has embedded cookies used to track on-line shoppers’ shopping pattern. It can benefit shoppers in such way that customers will be kept posted on the stuff they like in timely manner. However, companies that collect data from others should share or use it with great caution. I recall one case from target. There was a lawsuit that one of target customers sued target for exposing her personal data. Target got to know one underage girl was pregnant when tracking her most recent on-line shopping pattern. So, Target sent baby care product to her when her family didn’t know she was pregnant. Agri Stats should have shared data they collect with caution as well. If its subscribers used the data to create unhealth competition, damage business ecosystem and jeopardize end customers, Agri Stats should deny the request. Agri Stats should look beyond its own profit since the service it provides could potentially have huge impact on the industry. It is really a business ethical thing. When there is no explicit law that control certain things, companies should make ethical decision on what should do and what shouldn’t. We are living in the big data world. It is common practice companies use data to compete. Data-driven business world is double headed spear. When companies use and share data correctly, it can help companies to make quick decision to be proactive in the competition. However, if companies use it in the wrong way, the repercussion is going to be dramatic.
It becomes common today that companies can easily attain information from their alliances or even competitors thanks for the development of supply chain management. I’ll consider such result as a chance to further improve performance and further strengthen their own competitiveness not a way of collusion for few reasons:
1. Every company nowadays is developing its own value, it can be on time delivery, lowest price, best quality and etc. It’s almost impossible to ask for the same product with the same price and same service. Every product is highly competitive with each others, especially for industries with low technical entry-level. If you stop developing better products, you’ll likely lose you market share in the long run.
2. Second, the difficulties of collusion in a poorly differentiated market making it even harder to cooperate with other companies. Thus, every users of Agristats will be expected to improve their efficiency based on the benchmarking results.
It’s a grey area, where people in the industry have made best use of the information available to them. The collusion allegation may or may not be true, as there is no clear proof of that (in this article at least). What I feel is that coordination among the players is more than just a means to inflate prices by controlling the supply, there may be several technical benefits associated with the AGRISTATS system. One can ponder over how much information can be made visible to the competitors and at what time, but it will be difficult to completely block information sharing in the industry as it brings plenty of benefits such as higher efficiency. Prices should remain at a level where sustainable profits are being made by the manufacturer so that he can grow his business.
If data sharing will be considered as collusion, many of the companies which are investing heavily into data analytics will come under the radar.
Sharing knowledge within the industry will benefit all players and decease the whole supply chain cost, enabling the companies to provide customers low prices. However, the government should set regulations for how the companies coordinate and they could not create a vicious circle of rising the price. On the other hand, if the prices went down as the industry claims, it actually does not have a direct connection with such collusion took place or not. Other effects might influence the decreased price, such as suppliers, distributers, or economic condition.
Data sharing between companies is a very common practice, and restricting that may foul the whole idea of a free-market. The type of data shared however should be put under scrutiny. The FDA could put restrictions on the kind of information shared or even track the data and control the price of the commodity. Sharing of data to manipulate the price of the commodity to reap profits is unethical and should not be legal. The sole purpose of sharing data is to improve and create new technology thereby keeping the industry brimming with competition and encourage new players to participate. Collusion may not be the reason for the rise in price of the commodity, as there is no solid evidence to back this allegation, rather I fell that the data sharing has caused all players in the industry to use a similar strategy. On the other hand it is also not feasible to day that the manufacturers did not collude, had the prices gone down. Regulations put in place would bring back stability to the market.
In my opinion, industry participants are seldom willing to share their details with each other. If they are willing to do so, why do we think it is unacceptable? To some extent, coordination can increase efficiency, reduce unnecessary waste, and then reach higher levels to achieve economies of scale. The same idea is also true for building alliances. If these companies are happy to share revenue with customers by lowering prices, consumers can also get the benefit, which is a win-win situation for both parties. In fact, things have two side. It is hard to decide how much information can be shared and to control how others use it, so law enforcement agencies should enact laws to protect both parties, too.
I think not all information should be shared. The more transparent an industry is, the more chance that the collusion might occur. In this case, the specific rampup plan shouldn’t be shared with each other, in stead, the up-down trend can be shared. By doing this, the price would be more stable.
The profits improved from such shared data can be considered as industry efficiency benefits. A very good example would be hotel industry. Each individual hotel is willing to share its data with stats company, and then retrieve the industry report for its location. The result is that all the hotels in that specific area having the idea of how the occupancy rate would be and what room rate is appropriate. So I would say using shared data to improve efficiency is acceptable, and it is the benefit that the entire industry can share.
Price went down or up in a certain period cannot be considered as collusion did or did not take place. It is also possible that it was simply because of the demand fluctuation in that period. We cannot just make conclusion base on price change.
Information shared about production plans such as technological advances, labor skills, lean techniques, etc. between firms can generate production efficiencies and overcome the production threshold for the industry. However, sharing such details about the production methods can’t enable collusion. A company has to align its activities to suit its strategic position. It is difficult for competitors to imitate those activities without changing its business model and strategic position. For example: When Continental Airlines which provides full-service set out to match Southwest Airlines which delivers a low-cost service, the former had to bear major losses. Therefore, data that improves production effectiveness should be shared.
Information sharing by businesses is only used to access information that is not made public, or is made accessible to only a set of subscribers. This leads to information sharing among companies, resulting in strategies that benefit all parties and an increase in the prices of their products. Decisions resulting from data sharing should definitely be used to increase profits, but not at the cost of increasing prices, thereby affecting the consumer and inviting lawsuits.
Ideally, due to information sharing, the cost of manufacturing should go down, resulting in better prices for the consumer, or at least a lower cost for the manufacturer. Increase in price should not be the result of data sharing and efficiency benefits of the industry. The industry’s claim that the prices went down is not backed by any proof, and it is not an evidence of a collusion not taking place, since the data sharing could be done on multiple levels, and not only to increase / decrease the price point.
Information sharing enables coordination and allows every player to get a bigger piece of the profit pie. Having information on the ramp up plans of your competitors gives you an opportunity to plan more efficiently but it is still a startegic decision that every company has to make and just having the information is not evidence that there was collusion. However, there should be some kind of scrutiny of the possibility of a cartel being formed here. As in any market, restricitng competition and having one or two power players is not good in the long run for the growth of the market. Additionaly, the big players own and operate all the means of production, including the feed mills, slaughterhouses, trucking lines and even the hatcheries that develop the best strains of chickens. The only piece of the supply chian they don’t own here are the farmers and if there is collusion – these farmers are the ones who would suffer as they grow the chicken contracting with these companies and there could be possible exploitation by these companies.
Data sharing is a critical aspect which can helps to bring coordination, cooperation & transparency among different player in supply chain network.
Such collaboration intended to benefit the customer at the same time keeping supply chin player’s interest intact.
Collusion is a sign for healthy competition. Industry saying price went down may be the result that more supply available after production ramp, the profit increase may be seen as serving more & more consumer once all competitor work in collaboration. May be the price increase need to be analyzed more to understand its correlation with data sharing & eliminating other aspect which impact the price.
Here we are talking about a supply coordination in Chicken industry. Price increase for consumer can be seen as negative aspect but difficult to link solely to information sharing. Some player in chain might became an opportunistic when they got the information on demand & production ramp-up plan for their competitor. This might have help them to act more proactively on supply side as well as to increase a profit margin by playing with product price, But if you look at the big picture, such kind of data sharing definitely helps all the player to improve the efficiency and to satisfy consumer demand.
Such share data which improve profit be considered unacceptable for time being, but in long-term future it definitely helps to predict the demand, prepare for opportunity & match the supply accordingly.
Collusion occurs when there is explicit coordination, exchange on one-to-one information and agreements.
The action lawsuit is about companies benefitting from a detailed report that Agritech is publishing. The reports are anonymous in nature and saying that the different companies might also be concentrating on different geographical areas in the whole market. A form of collusion that might take place would be tacit collusion, which may have a similar result as explicit collusion, but it can’t be proven in court due to lack of evidence such as written mails, phone calls, or meetings.
All industries have industry-oriented conferences, fairs, and industry journals. Such exchanges of information beckon invention and innovation. This information exchange is required for the overall benefit of the industry. The information shared can also be used by other companies to improve their processes and undercut the competition, but the plaintiff suggests, without any evidence except an indication of a steady rise in prices, that they colluded instead of competing is without any evidence. No other evidence such as inflation, the market forces, the price of logistics, insurance, and other factors that may affect the price of the commodity was explored.
I believe that there should not be laws in which information sharing through research journals are being done be deemed illegal, except where the any parties involved have communicated to regulate the price of the product.
Information sharing is a significant driver of innovation and provides statistical information about demand ,capacity, investment plans etc. Companies use the data to benchmark performance against competitors. Increased market transparency helps to improve efficiency, but collusion claim might not be true as it is the responsibility of the firms to act independently on the market and if the data is publicly available ,information sharing does not add to the risk of collusion.
The level of coordination and information sharing is determined by the market and this affects the volume of demand, price, delivery time etc. Hence the fluctuation in the price can be due to multiple factors such as increase in supply, decrease in purchasing power of customers etc and thus cannot be directly linked to collusion However, there should be information sharing contracts among the firms to prevent the use of data unethically.
Companies can grow mutually by sharing information. Considering the telecom Industry in the USA, major players in the market are strategically positioned to avoid competition and can control the price of the service in the locations. Thus Industries can benefit themselves but sharing information among and can restrict competition, devoid users of competitive prices and hinders the growth in the Industry. With an Internation board or an organization in place to ensure the ethical use of information shared industries can progress along with people reaping its benefits.
Data sharing is an essential tool for an industry to grow. As more data is shared, certain big players tend to benefit more at the expense of smaller players in the industry. So long as it is used to improve the production system, data sharing between companies in an industry should not be an issue. Only when big players start manipulating with the price of the commodity and its demand, it should be considered collusion. In this case, the change in price (increase or decrease), we cannot say with certainty that the change is price was due to the collusion as there are several factors affecting the prices. Thus, to ensure that there is ethical data sharing there needs to be a regulatory authority to make sure big players don’t consume the entire market share.
In this of data and technology, sharing of data to improve the overall efficiency of the system and bringing the best prices for the consumers seems to be the objective of every industry player out there. Also, the data that was found against which lawsuit filed resembled the data from Agri Stats and so could not be claimed that it was the exact data. And in this age of Predictive and Prescriptive Analytics working on data and predicting the future trends is not a new or impossible task. So if the sharing of data works best in the interest of the consumer and helps achieve efficiency in supply chain and better coordination, then the most of it should be made to be effective in the industry.
I believe that the impact of information sharing among the companies within a single industry is different for different industries. Chicken industry deals with a functional product and the entry barrier to this industry is low. Therefore, increasing operational efficiency is highly desirable to gain better profit margin. Information sharing for this kind of industries helps the companies to reduce waste, increase operational efficiency and as a result it attracts more players in the market. Therefore I believe, even if some players collude, there would not be any significant price hike, rather chicken manufacturers would be able to provide more competitive price to the customer as they reduce their manufacturing cost.
Now there are other kind of industries, where the products are innovative and the product life cycles are very short. In those kind of industries, companies compete with each other to gain the first mover advantage. Information sharing is highly sensitive for those industries and open forums such as “Agristats” may not be beneficial to the companies. Overall in my opinion, the extent of information that can be shared among the competitors really depend on the industry in concern.
If prices went down in the period of information sharing, it would be difficult to determine whether or not there was collusion. If they were colluding, it is possible that the prices did not drop as far as they would have normally because of collusion. However based on the information available to the public, it does not appear that anything illegal took place. I agree with a few of the comments above that state this is more of an ethical issue. Agristats is simply compiling information, companies are not meeting together to set prices. If companies on their own use some of the same information to make similar business decisions without talking with each other, then it doesn’t seem like collusion to me. But, this may be something that should be considered to be updated in the law in the future, maybe there is too much information sharing going on and that should be stopped.
It is no doubt that building an information sharing system would improve the production efficiency. For instance, a company in chicken industry can share its historical demand information to Agristats. In return, the company can obtain some important industry information from Agristats, such as market share, demand trend, and price distribution. With the information, the company is able to make some changes in its operation plans and strategies in order to be more competitive. However, I believe that some information should not be shared with competitors in the industry. For example, sharing some commercially sensitive information, such as contract details, offer price, and future operation plan, increase the risk of against antitrust laws. Also, the information which is highly technical should not share with other companies.
In addition, I think it is not appropriate to identify collusion did or did not take place based on the price went up or down. Besides collusion, there are many other factors can lead to price fluctuation, such as breaking news, over supply and supply insufficient.
If we compare the current price with the old indices for the product, it will be clear whether the industrialists are taking unfair advantage of coalition or not. It would be helpful in testifying the industrialists comments on varying prices.
Although we can not deny that there can be other reasons for changes in price such as presence of new small players etc.
Data sharing can not be prevented in the current digital world with the lawsuits. If one method of data sharing is deregularised, organisations would find its alternative to share data by the very next hour. What can be done is to set an upper price level of the product and make sure that every one follows that.
As far as rational benefits are considered from the data sharing, they should not be discontinued, and at the same time it should be assured that no unfair advantage is being taken in terms of sales price of the product which can be done by setting the maximum price limit that can be decided on the basis of previous price indices and it can be escalated also with the controlled rate.
The transfer of data is definitely profitable for the industry as it will enable coordination without meetings. But there must be a regulatory with the amount transferred as this is important to keep the patency and copyright issue. This will enable the amount of data that is acceptable to transfer. While this will definitely helps increasing prices but it doesn’t necessarily mean that the decrease in price is due to collusion failure. There might br lot of other reasons apart from coordination failures that might cause the decrease.
Collusion was a hot topic in the recent past, with the Democrats claiming President Donald Trump colluded with Russia to help him win the 2016 elections. Another interesting accusation on collusion can be seen in Hasan Mihnaj’s Patriot Act episode about how telecom industry runs a monopoly in the USA. For anyone who’s interested, https://www.youtube.com/watch?v=xw87-zP2VNA&t=1099s.
With respect to the particular problem, while Eli could better regulate what is being done with the data being made available to these companies, the companies themselves cannot be implicated without concrete evidence that there was information sharing directly between them. Lowering of prices during that period doesn’t does not necessarily exonerate them either. Other factors might have played a part in that decision being made. Rather, a lowering of both their prices might even point towards collusion. At this point though all of this is just speculation. Better monitoring of who is using the data and possibly how it is being used might help determine whether any violations were made.
The article reminds me of the ‘BullWhip’ effect on how important is information sharing when it comes to coordination efforts between various stakeholders in business such as retailers, distributors and all the way till manufacturers. However, with respect to the case at hand it appears to me that though ‘Agristats’ claims that its information cannot be used to make decisions regarding production of chicken and the associated pricing in the future, there is always a possibility for the poultry companies to reverse engineer the data to find out what they require and involve in collusion with each other. Such collusion is healthy as long as operational efficiencies are achieved and more importantly other stakeholders in the supply chain are not negatively affected.
In some scenarios, collusion can take place wherein big companies might want to relieve stocks of chicken to reduce inventories, resulting in decrease in the price of chicken (assumption being demand remains constant). Hence, the ’cause-effect’ relationship needs to be analysed between information sharing, collusion and end result of price surge/fall so as to determine what elements of the data need to be masked or should be restricted. In addition, even though data is shared between two private entities under an agreement or trade policy, since the end consumer is affected should the surge in the price of chicken happens, such data should be placed under scrutiny and needs to be regulated by a national body such as NCC (National Chicken Council) of USA.
In an ideal scenario as a result of Effective Communication and increased sharing of information among parties the performance of the supply chain should improve, leading to greater efficiencies, reduced cost and greater profits, which is a competitive industry benefit the consumer as well with reduced prices. Unfortunately, without regulation, unfair practices such as collusion can take place which prevents the benefits of information sharing from reaching the consumer on the contrary in this scenario the consumer gets exploited instead. In the case of the Chicken Industry, there is not enough evidence that concretely signifies the existence of collusion. Eli Lily is within their legal right to provide the consolidated information to their clients and technically speaking the competitors never actually met to coordinate any efforts for collusion, thus providing little basis from a legal standpoint for a lawsuit. It would be very difficult to concretely pin the variation of prices down to just the information sharing. There are a multitude of other factors associated with a business in the industry that can influence the prices, and there is insufficient evidence, in this case, to concretely prove the existence of collusion. That does not mean regulation should not take place though , we have enough evidence through history that when lacking regulation, greed inevitably becomes the driving force leading to unfair practices taking place as was the case in the Wheat industry for Pakistan where the major wheat manufacturers would share information with each other to create artificial variations in supply to cause price hikes.
The need for regulation still exists but should not disqualify information sharing in the industry as the benefits associated with it for the industry are clear and proven.
According to me sharing of information is needed to such an extent that it would improve the overall supply chain of the system. This would reduce the bull whip effect and increase profits to all the different legs of supply chain. If the competitors have information about the prices there is a very good chance that the overall prices in the industry would decrease. The information can also be used to set benchmarks to improve the over all efficiency.
Companies collaborating with each for improving the efficiency of the industry as a whole is not new. In this case, sharing of best practices helps keep a lot of players in the Chicken Industry afloat, thereby providing opportunities for employment and decent returns for equity holders. If such an agreement leads to price collusion or cartel formation, then it is the duty of the government to take appropriate action.
There are two questions pertinent in the above-mentioned situation.
1) Was a data-driven technology misused to provide an avoidable competitive edge to market players and took away the ‘free’ from free-market economics and hence a possibly rigged price discovery?
2) The question of better optimization and improving profit margins because of this arrangement.
As far as antitrust data transfer is concerned, it is an offense to consumers trust. A system giving strategic information that can influence market prices in favor of suppliers is indeed unhealthy going forward. So, by all means, it should be regulated. The issue is how? The question would be to what extent or market power this should not be disturbed because after all till it isn’t a crime by law it is not. But in my view, the very existence of such tools in essential terms collate firms across into one, which basically creates the monopoly we don’t want. Better optimization across supply chain happens in these scenarios.