Tuesday, May 10, 2011

A cartel of a different kind

According to Webster an economic cartel is "a combination of independent commercial or industrial enterprises designed to limit competition or fix prices". Usually a group of companies conspire to have higher prices on their products (like the recent case of detergent market in E.U., or the infamous notarial price lists from Romania) or to deter other parts to enter their market (what Vodafone and Orange were charged in Romania), but in this case a group of companies tried to fix the price of labour. Well, labour is a special market anyway, with a lot of social implications, but this market usually has an important asymmetry of information over salaries between the employer and the employee, as many private companies require their employees not to disclose their income (the study of asymmetry of information in markets and its implications was developed by Joseph Stiglitz and he was awarded the Nobel prize in economics for it) . Even in these conditions some companies (namely Apple, Google, Adobe, Intel, Intuit, Lucasfilm and Pixar) allegedly engaged in even more anti-competitive practices (like an agreement not to try to hire employees of one another)? I understand that the competition for talented engineers is tough in Silicon Valley, but these companies are among the most profitable on this planet. It's always nice to save some pennies though, isn't it?

See the full story here with a nice diagram showing the suspected bilateral agreements between various companies.
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