Buy our book here.

thCABXFRXX

In various news articles in May 2013 (Watt, 2013 & Anon, 2013) the issue of price fixing, within the energy industry, was heavily debated. In Chapter 14 of our book we discussed the factors that impact on the way companies price their products and services. One issue that was considered within Chapter 14 was legislation. We explained that consumers are protected from companies fixing prices by legislation – one of the examples we gave you related to the banking industry.

 

In May 2013 David Cameron, the prime minister of the UK, discussed the potential issues of price fixing in relation to oil. Following the European Commission’s raid on many oil companies including BP, Royal Dutch Shell and Norway’s Statoil the anti-trust regulators have started an investigation of price fixing, which considers the past ten years. It is speculated that the average household may have spent an additional £2,000 on oil products due to the fixing of prices. Although the investigation is only in its infancy, David Cameron warned that if the investigation proved that oil companies had engaged in any form of price fixing the ‘full force of the law’ would be used to bring these companies to justice, some have speculated that oil executives could face jail.

 

This news item demonstrates that pricing is a serious issue within industry and accounting is not the only factor to consider when setting prices, management accountants must consider the wider economic and legislative issues to avoid serious embarrassment for their organisations.   Anti-trust laws are in place to protect consumers from cartels forming and practices that create abuse of dominant market position.

 

This information was collated from the following three sources:

Watt, N. (2013) David Cameron ‘deeply’ concerned by oil price fixing claims. Guardian accessed May 16th. http://www.guardian.co.uk/business/2013/may/16/oil-price-fixing-criminal

 

Anon (2013) BP and Shell price –fixing investigation: oil executives may face jail, warns David Cameron. Independent, accessed 15th May http://ts3.mm.bing.net/th?id=H.4714681125701846&pid=1.7&w=207&h=143&c=7&rs=1