Abstract
The purpose of this chapter is to present the results of the documentary analysis of the case of the toilet paper cartel in Colombia and the effects of corporate cartelization. The results indicate that the conduct of the companies involved in the toilet paper cartel in Colombia was sanctioned for alleged violation of free competition and consumer rights. The cartel caused consumers to reallocate their income in order to access the cartelized product, leaving them to spend that money on other products and/or services, which also affected other companies in the market. Finally, any business cartel is a serious distortion of free competition. In turn, the agreements put an end to the competitive process and break the normal functioning of the market, which translates into harm to consumers and the economy in general.
TopIntroduction
In Latin America, at least 600 companies were sanctioned between 2012 and the first half of 2017 for agreeing with their competitors to practices such as artificially increasing the price of products and services to the detriment of consumers, sharing markets, and preventing the entry of new players that could affect their profits. The data was obtained from 14 state competition institutions in the region, which state that the fines applied in this period total more than 2,600 million dollars; and cover items such as paper, sugar, flour, medicines, cement, gasoline, and land, sea, and air transport, and health services. In most cases, consumers did not obtain any compensation after the bad business practices were detected (IDL-Reporteros, 2018).
In Colombia, companies with a good track record and reputation have been administratively sanctioned for engaging in corporate cartelization practices and employees have been declared administratively liable by imposing personal fines on those who allowed anti-competitive conduct to be carried out, such as collaborating, facilitating, authorizing, executing or tolerating conduct that violates free competition (Abad, 2019).
The case of the toilet paper cartel in Colombia is very relevant because the companies that are part of it had always been companies of very high reputation, recognized for their way of operation and for the product involved; therefore, a business cartelization impacts the corporate reputation and management of organizations.
The case of toilet paper cartelization in Colombia has generated uncertainty since large companies in this paper sector were involved in illegal agreements to fix the price, limit production and control the toilet paper market. As stated by Legis (2018), cartelization is an agreement between a group of competitors that aims to limit competition between them, which makes them a monopoly, thus affecting the economic and social system.
This act of cartelization took place between the companies Kimberly, Familia, Cartones y Papeles de Risaralda, and Papeles Nacionales, which from 2000 to 2013 decided to set the prices of napkins, hand cloths, kitchen paper and toilet paper in the Colombian market. This pact generated a great scandal given that this market moves around $1 trillion Colombian pesos per year (US$ 518,987,145 calculated with the representative market rate of December 31, 2013, of $1,926.83 per dollar) (Bohorquez-Aya, 2016).
The uncertainty generated by a business cartel can lead to confusion and discouragement, as well as changes in the markets and in the variables in which they are used to make decisions, thus causing concern, since what worked yesterday may not be valid today. In the same vein, Martinez-Gonzalez et al. (2017), quoting Fernandez (2004), define uncertainty as a set of circumstances that take us away from our comfort zone, as they do not conform to organizational or personal routines. In the acronym VUCA, the “U” refers to uncertainty or lack of predictability in matters and events (Lawrence, 2013 quoting Kinsinger & Walch, 2012). In volatile times, it is tricky for leaders to take into account past events that serve as indicators of future outcomes, making forecasting extremely difficult and decision-making challenging.
Key Terms in this Chapter
Uncertainty: Uncertainty refers to the lack of knowledge or certainty about a future outcome. It can be caused by the lack of information, data variability, the complexity of a system, or the inability to accurately predict an outcome. Uncertainty is a common part of decision-making and modelling in a wide variety of fields. Uncertainty is related to the lack of predictability and clarity about the future. In an uncertain environment, it is difficult to anticipate the results of decisions and actions, which requires constant adaptability.
VUCA: The term “VUCA” is an acronym used to describe an environment characterized by volatility, uncertainty, complexity, and ambiguity. Each of these letters represents one of the characteristics of the environment.
Consumer: Broadly speaking, a consumer is a person or entity that purchases goods or services to meet their needs or desires. Consumers are a critical part of the economy, as their demand for products and services drives production and exchange in markets. Consumers play a central role in the economy and in the functioning of markets. Their purchasing behavior and decisions affect not only businesses, but also society as a whole. For this reason, particular attention is paid to the protection of consumer rights and the promotion of responsible consumption practices.
Cartelization: Cartelization is a practice that involves cooperation between competitors in a market to coordinate their actions and control certain aspects of the supply and demand of goods or services. This is done with the aim of increasing their profits or influence in the market. Cartelization is often considered an anti-competitive practice and, in many countries, is illegal.