The U.S. Justice Department isn't saying what prompted its current investigation of possible ``anti-competitive practices'' in the tire industry. However, antitrust watchdogs are barking up the wrong tree if their probe is focusing strictly on ``price-fixing,'' as most news accounts suggest. Any suspicion of widespread price-fixing by tire makers seems ludicrous in a market where manufacturers rarely realize half the amount of their announced price increases-and one in two firms was in the red as recently as two years ago.
The government's own Producer Price Index, in fact, shows tire prices up only 7.6 percent in 14 years.
It's difficult to imagine tire makers ``fixing'' prices so low they can't make a profit. After all, isn't the objective of price-fixing to make more money-not less of it?
Therefore, a government investigation based on such an implausible suspicion is a waste of time and money.
And the cost will be enormous-not only for taxpayers but also for manufacturers forced to waste millions of dollars and countless manhours furnishing mountains of data and worrying over the investigation's outcome.
Perhaps the swiftness in which tire suppliers have been raising prices recently following the announced price hikes of Goodyear or other market leaders has the appearance of price-fixing when viewed from the perspective of Justice Department officials.
But the truth is that these companies are merely desperate to gain any momentary relief from the relentless pricing pressure so characteristic of North America's tire market. And more often than not, such relief turns out to be unattainable in the face of competition.
This was the case in recent months as manufacturers saw their raw material costs skyrocket. (Natural rubber, for example, is selling at its highest price in 40 years.) Few makers have been able to completely offset such cost increases by hiking tire prices.
So unless Justice Department investigators know something most of the industry does not-or their probe is based on allegations more plausible than price- fixing-they should seek more fertile fields to plow.