Business: Rigging the Bids?

Ever since the TVA complained last spring about identical bids for electric-power-generating equipment, the Justice Department has been investigating the pricing policies of the nation's major electric-equipment manufacturers. Last week, in a series of criminal antitrust indictments, a federal grand jury in Philadelphia charged that General Electric Co., Westinghouse Electric Corp., Allis-Chalmers Manufacturing Co., I-T-E Circuit Breaker Co. and Federal Pacific Electric Co. conspired to submit "noncompetitive, collusive and rigged bids" on private and government business valued at $209 million a year. The grand jury also indicted G.E., Westinghouse, I-T-E Circuit Breaker and nine other electrical-equipment makers for conspiring to fix prices on sales of another $55 million a year.

The government charged that, to set prices and rig bids, representatives of the five major manufacturers met at least 35 times over the past year, took hotel rooms under assumed names. The government market broke up among G.E. (39%), Westinghouse (35%), I-T-E Circuit Breaker (11%), Allis-Chalmers (8%) and Federal Pacific (7%).

At the meetings, the indictments said, the defendants would designate the manufacturer to submit the lowest bid. To quote nearly identical prices, the manufacturers used a "phase of the moon" or "light of the moon" formula.

Under the plan, as the Government outlined it, the companies rotated the prices of their bids to correspond with the moon's phases; one bidding the low prices, others quoting intermediate prices, and one the high price. Thus, each manufacturer would not only know what the others were bidding but would periodically be low bidder and get his agreed share of the market.

The grand jury indictments came as no surprise to General Electric Co's. Chairman Ralph J. Cordiner. Last month he reported that G.E. executives who had shown "flagrant disregard" for G.E.'s policy by discussing prices with competitors had been downgraded and that their salaries had been cut. But for Westinghouse's management the indictments "came as a shock." The company said the actions charged to its employees are "completely contrary to long-established policies," though no action had been taken against the employees involved. If convicted, the companies will be subject to a maximum fine of $50,000, and the 18 individual defendants to a year in prison and a $50,000 fine.