Gouging is the concept of charging unfair amounts of money. A company that has a smaller net profit margin than the return on investment from my stock portfolio, every quarter for the last ten years, is incapable of being charged with such a thing.
That is to say, if Daimler wanted to make lots more money, they’d liquidate this silly car business and hire me to manage the proceeds of the sale. There isn’t a car company on earth that wouldn’t be better off that way. Save maybe Morgan.
Thinking that making money selling something equates to gouging makes you deserve my derision.
I am not representing MB, in particular. I am a small business man who spent far too much time having people treat me like my gross profit margins being more than 5% was some kind of devilish thing. I made an ok living doing it, I certainly wasn’t getting rich.
And yes, I entered into collusions of various sorts with my competitors. In a theoretical Smithian economy, collusion is a bad thing because it stifles competition; but Smithian economies don’t actually exist.
With this collusion, the auto business barely makes economic sense. Without it, all of these companies would be brought to their knees. In the US business regulation is too loose, and its letting various parties wreck the economy by consolidation reducing the paid labor pool- an economy needs a well paid labor pool in order to generate sales.
In Europe they are currently doing the opposite: wrecking the economy by so over-regulating that companies can not make money, which results in them not being able to continue... and thus wrecking the labor pool and the economy.
Well, there are many ways to collude, and the onlyillegal one is the explicit one, meaning that you secretly meet with the othersand agree to something, like what is implied in the original article. There areother tacit collusions that arise from strategy. Game theory is the study ofsuch equilibriums and strategies to maximize profits. The problem relies thatnot all managers are capable and have studied Game theory, some just get up reallyhigh the corporate ladder kissing asses and doing the political game, so the companies end up makingdecisions that go against the whole industry and hence themselves in the longrun. That is why sometimes a little illegal collusion is needed to stop thedownfall.
What was happening is that companies were spendingtoo much in new developments, but were not able to charge enough to make itworth it because the intense price competition, especially from lower endmanufacturers. Then they simply decided to stop innovating until the previous technologywas paid off.
Now, there are other ways to collude that arelegal and those are called “Cooperation”, “Joint-ventures”, etc. Maybe thedifference is that they come up front before doing it. At the end the effect issimilar, since they remove competition, at least in that front.