Light Bulb Cartel

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The Light Bulb Cartel Introduction Light bulbs are very important in our lives. Probably you know very little about light bulbs. When was the last time you changed a light bulb? We saw Phillips release an LED light bulb with a life span of 20 years. While this is deserving recognition, the real marvel of indoor illumination is the Centennial Light in Livermore, California, which is an incandescent light manufacturer back in the 19th century. The world’s longest-lasting light bulb still shines today uninterrupted after being used for a century. We are quite sure that the early light bulb innovators like Thomas Edison and Adolphe Chaillet had always pushed for products with the utmost longevity. But where did our ability to make along lasting bulbs go? This takes us to a corporate conspiracy which points out to a light bulb cartel called the Phoebus cartel that designed planned obsolescence to manufacture light bulbs do not last long. This is designed to get people to buy more. The Phoebus Cartel The Phoebus cartel was established in the 1920s with a purpose to control the manufacture sale of incandescent light bulbs. They would set up market territories for themselves and even fix or lower the useful life of such bulbs. The companies that comprised the cartel were based in Europe and America. Thee Phoebus cartel was founded in Geneva and had the intention to last for thirty years. However, the cartel ceased in existence in 1939 due to the outbreak of the Second World War. The companies that made up the cartel included light bulb manufacturers like General Electric, Philips, Osram, and Associated Electrical Industries among others. The Phoebus Cartel was a force to reckon with and created a notable landmark in the history of global economy primarily because it engaged in large-scale planned obsolescence to get consumers to buy the bulbs repeatedly thus the companies would generate repeated sales and maximize profits. Moreover, the cartel reduced competition in the light bulb industry for more than a decade. The Phoebus cartel did more than just hike prices in the imperfectly competitive market. They went further to limit product innovation. And over the gradual course of a few years, the manufacturers actively lowered the lifespan of light bulbs. The industry standard of 2,500 hours which was set in 1924 eventually dropped to 1,000 hours by 1940. The manufacturers made more fragile light bulbs deliberately and they ensured the competitors were closely monitored as well to ensure strict adherence to product degradation. Before the dissolution of the Phoebus cartel due to increased external competition and disruptions of the Second World War, it had already successfully demonstrated a very important point that limiting product innovation and product quality was a feasible way to ensure sustained consistent sales and profits. Indeed all evidence points to the cartel’s being motivated by increased sales and profits, and not by what was best for the consumer. In carefully making a light bulb with a relatively short life span, the cartel thus gave birth to the industrial strategy now known as planned obsolescence. Today, many countries are phasing out incandescent lighting in favour of more efficient and a little pricier LEDs. Therefore, it is important to revisit this history particularly as a cautionary tale about the strange and unexpected pitfalls that can arise when the new technology replaces the old one. Degrading the quality of light bulbs You might be wondering how the Phoebus cartel was able to carefully degrade the quality of light bulbs. This corporate conspiracy shows that to create a light bulb that reliably failed after an agreed-upon 1,000 hours took the cartel several years. In 1924 the household lighting bulb was already technologically sophisticated. The standard life span of a light bulb was 2,500 hours or more. The cartel, on the other hand, was striving for something less and so they would systematically reverse decades of progress. This details of this effort by the Phoebus cartel have always been emerging slowly. However, some facts emerged in the 1940s, when the US government investigated General Electric and its several business partners for anticompetitive practices. Other facts emerged more recently when two journalists delved into the corporate archives of Osram in Berlin. Osram is one of the world’s leading manufacturers of all kinds of lighting, including advanced technology LEDs. In its corporate archives, it was discovered that there was a correspondence between the cartel’s factories and laboratories which were researching how to modify the filament and other measures to shorten the life span of their bulbs. The Phoebus cartel did indeed take its operation of shortening the life span of the bulbs every aspect as seriously as earlier researchers had approached their business of lengthening it. Each factor was bound by the cartel agreement and they had to regularly send samples of its bulbs to a central testing laboratory in Switzerland. There, the bulbs would thoroughly be vetted against the set cartel standards. If any factory submitted bulbs that lasted longer or shorter than the set life span for its type, the factor would be fined. In addition to that, companies were fined for exceeding the set sales quotas which were constantly being adjusted. According to a memo by Tokyo Electric to the cartel, after shortening the life span of its vacuum and gas-filled light bulbs, its sales had increased fivefold. Attempts to restore the life span There were continual reports of cartel members’ attempts to resort the life span of their bulbs to the old levels in defiance to the watchful eyes of Phoebus. At one point, some members in some way introduced longer-lived bulbs by designing to work at a voltage higher than the standard line voltage. However, then Phoebus development department’s customary report of voltage statistics revealed this kind of product enhancements. This reveals that altering the light bulb’s rated voltage was one way to modify the life span of the product. Another way was to adjust the current. General Electric adjusted the current to decrease the life span of its flashlight bulbs. The GE flashlight bulb before the formation of the cartel was designed to last longer than three changes of the batteries. But after the formation of the cartel, the lifespan was the cut to two battery changes and afterwards, the GE engineering department proposed that the bulb last not past once battery change. By increasing the current, the bulb produced more lumens per watt. More current means not only more brightness but also higher filament temperature and a thus shorter life. The cartel mainly focused on the filament in terms of its material, shape and the evenness of its dimensions. Success After nearly a decade of its research, the cartel succeeded in the quest to shorten the lifespan of the light bulbs. The average life of a standard reference light bulb produced by the Phoebus members dropped by a third between 1926 and the fiscal year of 1933-34, from 1,800 hours to only 1,205 hours. During this period there was no company producing bulbs that lasted more than 1,500 hours. The cartel members had the ability to design a light bulb that was both bright and long-lasting. But such a product would have gone against the members’ desire to generate more repeated sales from selling more bulbs. What’s more, the cartel maintained more or less stable prices even as the actual costs of manufacturing were dropping, which gave them higher profit margins. From its inception until the end of 1930, the cartel enjoyed a huge share of a growing market. The demise The Phoebus cartel continued its policy of producing short-lived light bulbs and elevating the prices. This gave its competitors an opportunity to sell cheaper goods. There was a flood of inexpensive bulbs from Japan, something that really threatened the cartel. Tokyo Electric, a member of the cartel, had no control over the numerous smaller workshops that produced bulbs almost entirely by hand. However, the Japanese consumers preferred the higher quality bulbs from the large manufacturers and therefore, the majority of the cheap bulbs were exported to Europe, the United States and elsewhere. There they were sold for a fraction of the price of a Phoebus bulb and also below the average production cost of a cartel bulb as well. There was no scarcity of the cheap light bulbs from Japan. The powerful and influential Phoebus was short-lived. The members of the cartel started struggling and between 1930 and 1933, the sales of the cartel dropped by more than 20 percent despite the growing overall market for lighting. The Phoebus cartel was weakened by the occasional conflicts among its member and by legal attacks in the United States. However, the Second World War led to the ultimate demise of the cartel. As the members’ host countries went to war, the operations of the cartel were disrupted. According to the 1924 agreement, the Phoebus cartel was supposed to end in 1955, but it was expired in 1940.