These two cases provide examples of markets that are characterized neither as perfect competition nor monopoly. Instead, these firms are competing in market structures that lie between the extremes of monopoly and perfect competition. How do they behave? Why do they exist?
The Temptation to Defy the Law
Laundry detergent and bags of iceproducts of industries that seem pretty mundane, maybe even boring. Hardly! Both have been the center of clandestine meetings and secret deals worthy of a spy novel. In France, between 1997 and 2004, the top four laundry detergent producers (Proctor & Gamble, Henkel, Unilever, and Colgate-Palmolive) controlled about 90 percent of the French soap market. Officials from the soap firms were meeting secretly, in out-of-the-way, small cafs around Paris. Their goals: Stamp out competition and set prices.
Around the same time, the top five Midwest ice makers (Home City Ice, Lang Ice, Tinley Ice, Sislers Dairy, and Products of Ohio) had similar goals in mind when they secretly agreed to divide up the bagged ice market.
If both groups could meet their goals, it would enable each to act as though they were a single firmin essence, a monopolyand enjoy monopoly-size profits. The problem? In many parts of the world, including the European Union and the United States, it is illegal for firms to divide markets and set prices collaboratively.