It took less than two months after the official end of the U.S. Justice Department´s probe into tire industry pricing practices for tire makers to launch a full round of price hikes. They better be careful.
Yes, tire companies can claim raw material costs warrant tire price hikes. And it´s indisputable tires are underpriced for the amount of technology that goes into the product.
The fact remains tire price increases were few and far between during the time of the Justice Department investigation. Maybe tire makers were just a bit gun shy.
In the years prior to the August 1995 start of the investigation, tire price increase announcements came like clockwork, at least two or three times every year.
The typical scenario: One tire firm would come out with an increase, followed by similar action by its competitors. One or more companies would try to gain market share by breaking ranks and cutting the increase. Invariably, little if any of the price hike would stick.
These rites of spring and fall—and often the end of the year to spur pre-buying by customers—lasted into 1995. While market conditions undoubtedly had some effect on pricing practices, 1996 and 1997 were conspicuous for their absence of mass price increases. The following year, 1998, brought a couple individual announcements, and by the beginning of this year, there were a few increases planned for individual lines.
It´s improbable tire companies conspired on prices, given the depressed nature of tire prices over such a long period of time. But tire makers should remember it was their lemming-like behavior in price increases that caught the Justice Department´s attention in the first place. It could happen again.