The light bulb scam

A conspiracy was hatched in Geneva in Switzerland on 23 December 1924. The conspirators were top executives of the biggest light bulb manufacturing companies in the world. 

Those present included representatives of Germany’s Osram, the Netherlands’ Philips, France’s Compagnie des Lampes, and the United States’ General Electric.

And what do you think was on the agenda? 

• Improving the technology of light bulbs to reduce electricity consumption?
• Improving the bulbs so they might last longer?
• Expanding production and reducing prices so more people could buy the bulbs (remember, a large number of people still used kerosene lamps).

If you selected any one of these options, you would have been wrong. The meeting in Geneva was not held to devise ways to benefit consumers. It was held to cheat consumers.

How? The sole purpose of the conspiracy was to reduce the life of the incandescent light bulb so that people would be forced to buy more bulbs. And to further the aims of this conspiracy, they created the Phoebus cartel, which would supervise how the conspiring companies would split the market among themselves, and, more important, how they would enforce a scheme to reduce the life of the electric bulbs they sold. 

The Phoebus cartel enjoyed a truly global reach. The U.S. company General electric was itself not a member but was represented through its overseas subsidiaries. The European members of the cartel included Germany’s Osram, the Netherlands’ Philips, Hungary’s Tungsram, Britain’s Associated Electrical Industries, International General Electric, a subsidiary of General Electric of the US, and Compagnie des Lampes, France. In addition, these companies roped in General Electric Sociedad Anonyma of Brazil, China General Edison, Mexicana de Lamparas Electricas, and Tokyo Electric, Japan.

The cartel’s market­ sharing- and price-fixing activities did not last beyond the 1930s. The Second World War found some of these companies in opposite camps in the war. But their reduction of the life span for the incandescent lightbulb lasted well beyond the war.

What was the conspiracy? The conspirators reduced the life of the incandescent light bulb from 1,500-2,000 hours, and even more than 2,000 hours, to 1,000 hours. They also cost more than they did before for longer life bulbs.

So what happened? While in the past researchers in these companies had spent time and resources to increase the life of the bulb, now they did an about-turn and spent their time trying to reduce the life of the incandescent light bulb.

Every factory had to toe the cartel line. And, to ensure that they did, in fact, do so, each factory had to send samples to the cartel’s central test laboratory in Switzerland. The lab tested hundreds of bulb factories.

If any bulb was found to last longer than 1,000 hours, its producer was forced to pay a steep fine. Producers were also fined for exceeding their sales quotas. 

Today LED lamps have virtually wiped out the incandescent lamps from the market.