|"Prost" - Germany in the midst of a price fixing beer scandal|
According to news sources, Germany is experiencing one of its largest beer scandals in its long and often not so proud history.
Price fixing - an agreement between companies who deal in the same or similar products and services - has been illegal in Western countries for some time. The aim of price fixing is to control prices, rather than let the free market determine the value. Ultimately, price fixing pushes the price of a product as high as possible, leading to artificially larger profits.
The defining characteristics of price fixing are agreements made between industry parties regarding price, whether expressed or implied.
There is now growing evidence that German beer producers have been fixing the price of beer for upwards of 20 years, according to Germany’s Focus news magazine.
Earlier investigations revealed that illegal price fixing took place between 2006 and 2008, but Focus now reports that those 2 years were “most likely just the tip of the iceberg.”
Two major manufacturers of German beer, Veltins and Bitburger, are at the center of the scandal. Corporate heads of those companies admitted that they had agreed by telephone to raise beer prices before industry meetings. Other manufacturers were than pressured to follow in their footsteps in private discussions at industry conferences.
A report released earlier this year from a German government statistics agency, says that Germans drank approximately 2.55 billion gallons of beer last year, a decrease of 1.8% over the year before and the lowest level since 1990. In 2005, the German publication Der Spiegel sighted a trend it termed “Brauereisterben,” making reference to the death of German brewing.
In 2010, statistics show that Germany placed second with respect to beer drinking per capita, falling behind the Czech Republic which placed first by a wide margin. Austria came in third, while Ireland and Canada placed fourth and fifth respectively.
The US is 12th among the beer drinking nations.
It is unknown whether the “you vill raise beer prices” scandal has had much influence on the gradual decline in German beer consumption, but in the end those types of practices can never help in the long term.
Those companies involved in the price fixing scheme could face huge fines.