2 - “Now You Are Asking for a Real War!”

Summary

• ◦ The two major providers of private alarm systems in Norway engaged in a simple collusive market-sharing agreement made possible by a feature of this market. Market sharing pertained to door sales, which is a key marketing channel. Companies Sector and Verisure agreed to abstain from door sales to private homes marked with the rival company’s sign indicating it was providing home security services. A deviation from the agreement was detected by monitoring customer churn across the private alarm companies. There is no evidence the two companies coordinated on prices; they simply agreed not to poach each other’s customers using the door sales channel and thereby softened price competition.

• ◦ Deviations from the collusive outcome arose from two different sources. One source was attributable to sales personnel who were not privy to the collusive arrangement. While high-level executives agreed not to poach customers and instructed sales personnel not to approach the homes served by a rival company, those sales agents periodically did not comply, presumably so as to meet their sales targets. The other source of deviation was attributable to the colluding executives. After the acquisition of a small rival company, there was a misunderstanding as to whether those new customers for the acquiring firm were part of the no-poaching agreement. While these deviations did lead to some retaliatory aggressiveness, the CEOs eventually resolved the matter and returned to their market-sharing arrangement.