Introduction
The price fixing case by Micron, Infineon, and Samsung presents an interesting ethical issue since big companies at times engage in this practice in order to avoid losses that may occur due to aggressive competition.
In this case, three of the four major companies in the DRAM market, Micron, Infineon, and Samsung, made an agreement to fix the prices for DRAM. The demand for memory chips by the personal computer industry had led to these companies investing in bigger factories in order to provide for the increasing demand for memory chips.
However, these investments had led to large inventories and intensive price competition among the major players. While competition is good for the industry, intensive competition might be damaging and in this case, it resulted in the companies having to sell their DRAMs at prices that were below manufacturing costs.
The three major companies therefore engaged in correspondence with each other and came to a consensus that they would move their prices upwards in unison.
Such a move would ensure that the companies were able to sell their product at a price that was above the manufacturing cost and therefore make a profit. The companies’ engaged in this price fixing in secret since such activity is illegal.
Price-fixing is not an acceptable behavior since it hurts the consumer who is forced to pay more for the product. This practice also results in companies making more money than they are entitled to since they do not rely on the market forces to set the price but rather their own.
The hefty penalty imposed on Infineon by the US government illustrates that the government views price fixing as an unlawful action. On the other hand, the companies have a right to make a profit and their major reason for existing is to make profits for their shareholders.
This major goal of the companies could not be realized in the fiercely competitive DRAM market where prices had moved to below the manufacturing cost. A question therefore arises as to whether there was a breach of morality by the companies through their price fixing actions.
An ethical analysis of the actions of the companies must be performed in order to determine if their actions were morally justifiable.
This paper will set out to assess whether Micron, Infineon, and Samsung acted virtuously in their collective decision to move their prices upward or whether they acted viciously.
Analysis
In virtue theory, emphasis is placed on the agent’s motivation with the rightness of an action being dependent on the motive from which it proceeds. Liezl explains it as “an action is right if (and because) it exhibits or expresses a virtuous motive or at least does not exhibit or express a vicious motive” (52).
According to this account of rightness, actions are right because they are done with virtuous motives on the part of the agent. Virtue ethics analyses the character of the agent who carries out the action and the agent’s morality is therefore used to decide on the morality of his/her actions.
While traditional virtue ethics focused on the virtues, modern virtue ethics take on an agent-based approach where motives are the primary concern (Bessant 430). Edmund Pincoff’s ethics theory presents the best model to use in this scenario.
In this theory, every virtue can be understood in terms of the role they play in human life and those qualities that it encourages.
Gruner observes that price fixing has an effect of normalizing this behavior and a company which engages in price fixing is more likely to continue with this habit and consider it a way of life (1).
Virtue theory argues that the wrongfulness of an action can be determined by “examining the kind of person the action tends to produce or the kind of person that tends to produce the action” (Velasquez 132).
On the price fixing case in question, we are not informed of the character of the major companies that engaged in this action. Even so, we do know that there was a statute outlawing price fixing in the US as of 2001. In spite of their knowledge of this, the three companies went ahead and engaged in price fixing.
The integrity of a company that would knowingly break the law is called into question. The companies were willing to risk the costs of violating price-fixing laws and this suggests that they had a strong motivation to engage in this act. Even so, all this is speculative since the case study does not offer any suggestion that the companies were immoral agents.
An analysis of the motivation behind the price fixing actions of the company’s must also be looked at since Virtue Theory considers the motivations behind an agent’s actions. The motivation of the companies in fixing price was not malicious.
From the information provided, there is no indication that the companies intended to harm the consumers by raising their prices. Instead, their intention was to ensure that they obtained a profit on their products, which were being sold at a loss due to the aggressive competition.
However, we can rightfully deduce what kind of a person such actions tend to produce. In the price fixing case, an analysis of the future consequence of the three major companies continuing with this practice reveals the following. If the price fixing is to continue, consumers will suffer.
Brander and Ross assert that the economic damages of price fixing are great since this practice causes consumers to purchase goods at excessive prices (336). Price fixing is harmful to the consumers who have to suffer from the high prices that are imposed on them by the customers.
The practice is also harmful to the smaller companies which can be eliminated from the market through the dominance of the major companies. Brander and Ross illustrate that the artificial manipulation of product prices stifles free and fair competition and this might cause the smaller companies to be eliminated (336).
The Virtue theory focuses on the type of person that we ought to be and not on the specific actions that should be taken (Weiss 113). In this case, the type of company that is desirable is one that is grounded in good character, motives, and core values.
By engaging in price fixing, the companies in question are not going to develop a bad character and their core values will be corrupted. The price fixing actions resulted in significant monetary gains by the companies that engaged in this practice.
In the “fixing the computer Memory Market” case, the companies involved were able to move their prices from about $1 to $4.50 a unit. At this high price caused by the price fixing, the companies were able to maximize their profit. It can be projected that the companies will become more selfish and greedy if they continue with these actions.
Proponents of virtues emphasize the role of character and being a good person is more important than knowing about the rules or principles of ethical judgment (Bessant 429).
Pincoff defines the moral virtues as forms of regard for the interest of others and the moral virtues under this definition include; benevolence, helpfulness, and selflessness (Weiss 113).
The companies evidently lacked these virtues when they agreed to increase the price of their product. The actions of the companies do not help in the development of a moral character but instead encourage an immoral one.
Conclusion
My first reaction to the Price fixing case was that it was justifiable for the companies to raise the prices in order to gain some profit from their product. This conclusion was arrived at since in my opinion, the fierce competition among companies was damaging to each of them.
Price fixing therefore seemed like the best option since it would ensure that each company remained profitable and would therefore be able to guarantee its future survival. While I appreciated the fact that price fixing is illegal, the rationale behind it seemed to be justified since a company should not be making a loss.
However, an in-depth analysis of the issue using an ethical theory introduced different perspectives to the case. Virtue theory has emerged as an appropriate theory to addressing the issues raised in this scenario. While virtue theory was helpful in this case, I found a number of major shortcomings in the theory.
To begin with, the theory fails to consider the circumstances surrounding the actions of the companies. The intense competition is what drove the companies to engage in the price fixing action. These external situations are very important in analyzing the moral character of the companies involved.
The theory also places too much emphasis on the acting agent and very little attention is given to the subjects affected by the agent’s actions. In this case, the subjects would be the consumers, the community, and the small companies.
The theory brought it to my attention that the intentions of the big companies had to be thoroughly reviewed. While at first I assumed that avoiding a loss was the only motivation, virtue analysis made me question the motivation of the big companies in fixing prices.
From this questioning, I was able to observe that price fixing could have been motivated by the desire to stifle competition from smaller companies in the market. The theory also highlighted to me that the future consequences of the actions taken by the companies must be considered.
In particular, the theory made me think about the kind of a company that the actions were creating. Ethics Theory suggests that the actions of an agent should make it more likely that the agent will successfully pursue virtuous goals in future.
In this aspect, the virtue theory was very important since it contributed a different perspective to my understanding of the actions of the company.
Instead of only focusing on the action taken by the companies, the theory forced me to analyze the underlying motivations and the future outcomes of the companies if they continued to engage in this behavior.
By applying Ethics Theory, it can be confidently stated that the companies acted immorally by making the decision to move their prices upwards. Price fixing undermines the desirable values of honesty and fairness that a good organization is supposed to practice.
Works Cited
Bessant, Judith. “Aristotle meets youth work: a case for virtue ethics.” Journal of Youth Studies 12.4 (2009): 423-438. Print.
Brander, James and Ross Thomas. “Estimating damages from price-fixing.” Canadian Class Action Review 3.1 (2006): 335-369. Web.
Gruner, Richard. Corporate Criminal Liability And Prevention. Harvard: Law Journal Press, 2004. Print.
Liezl, van Zyl. “Agent-based Virtue Ethics and the Problem of Action Guidance.” Journal of Moral Philosophy 6.1 (2009): 50–69. Web.
Velasquez, Manuel. Business Ethics: Concepts and Cases. (7th Edn). NY: Pearson, 2011. Print.
Weiss, Joseph. Business Ethics: A Stakeholder and Issues Management Approach. Cengage Learning, 2008. Print.