Cheering for LED Bulbs? Read This Cautionary Tale First

(Bloomberg Opinion) -- Last week, the administration of President Joe Biden announced regulations that will make it all but impossible to sell old-fashioned incandescent lightbulbs. LED bulbs — far more energy efficient and able to last 50 times longer — will take their place.

Cheer if you like, but history provides a cautionary tale. Nearly a century ago, a group of manufacturers known as the Phoebus Cartel colluded to manufacture inferior, short-lived bulbs. This sorry episode helps explain why today’s well-intentioned regulations may backfire.

A history of the lightbulb begins in 1802, when British chemist Humphrey Davy ran electricity through a carbon filament to produce a crude form of illumination. In subsequent decades, different inventors enclosed filaments in glass bulbs to produce light. But none proved practical or commercially viable.

In 1878, Thomas Edison patented a lightbulb that used a carbonized bamboo filament. This helped launch the lighting industry, though tungsten filaments soon proved far superior, becoming commonplace by the early 20th century.

By that time, lighting had become a competitive global business crowded with manufacturers. In response, companies began colluding to set prices and carve up markets. Then along came the cartel to rule them all: Phoebus.

The first meeting of this shadowy organization took place on the shores of Lake Geneva in Switzerland on Christmas Eve in 1924. The attendees called themselves the “Convention for the Development and Progress of the International Incandescent Electric Lamp Industry.” But Phoebus — from Latin and Greek for “bright” — sounded way cooler. The name stuck.

Big players dominated much of the market at the time: Germany’s Osram, for example, along with the Dutch firm Philips, Compagnie des Lampes in France and Tokyo Electric in Japan. All had a hand in the making of Phoebus, as did General Electric, which worked through overseas subsidiaries to dodge antitrust scrutiny.

The governing document of the cartel claimed that it had been formed to increase the “effectiveness of electric lighting and increasing light use to the advantage of the consumer.” This wasn’t entirely untrue: the cartel corralled member firms to adopt the now-standard E24 bulb socket, for example.

But looking out for the consumer wasn’t the cartel’s main concern. In the 1920s, bulb manufacturers had a difficult time making money because of intense competition. They solved this problem through a series of market manipulations, defining geographic markets and imposing sales quotas.

There was also a bigger problem that plagued their business. Years of tinkering had yielded bulbs that could last for thousands of hours. In fact, a few from this era are still working today. It was a terrible business model. 

The cartel decided to take action. Having spent years lengthening the lifespan of bulbs, the companies of the cartel now worked to shorten it. They formed a working group known as the “1,000 Hours Life Committee” tasked with building an inferior bulb. The real-life story of Phoebus, first uncovered by historian Markus Krajewski, was stranger than fiction.

The cartel poured resources into the project, developing the technical expertise necessary to manufacture lower-quality bulbs in a predictable, consistent fashion. These efforts went hand in hand with an audit system designed to force manufacturers to conform to the 1,000-hour goal.

The centerpiece of this system was an agreement signed in the late 1920s that required factories working for the cartel to send sample bulbs to a Swiss laboratory. Technicians there would subject the samples to a perverse form of quality control, testing them for abbreviated lifespans.

If the samples lasted between 800 and 1,750 hours, the factory could sell the rest of the lot without penalty. But if bulbs lasted between 1,750 and 2,000 hours, the guilty company would pay a fine of 20 Swiss francs per 1,000 bulbs sold. Fines increased the longer bulbs burned: samples that lasted over 3,000 hours would be fined at the rate of 200 francs per 1,000 bulbs sold.

The system worked. Bulbs had lasted an average of 2,500 hours before the cartel’s formation. A decade later, Phoebus had driven that number down to 1,200.

Some members tried to cheat, selling long-life bulbs in defiance of Phoebus. This didn’t sit well with the cartel’s masterminds.  Anton Philips, who ran the company of the same name, assailed what he called bulb “enhancements” designed to evade cartel restrictions.

In an angry letter to an executive at General Electric, Philips described the sale of such bulbs as “a very dangerous practice [that] is having a most detrimental influence,” undermining “the very strenuous efforts we made to emerge from a period of long-life lamps…” Philips warned that one day the cartel would be forced to “supply lamps that will have a very prolonged life.” The horror!

Though the cartel would eventually unravel by 1940, its bizarre legacy remains alive and well: the average lifespan of an incandescent bulb remains stuck at around 1,000 to 1,200 hours.  More generally, the strategy of planned obsolescence that Phoebus pioneered became the norm throughout the consumer economy.

At first glance, the degraded performance of incandescent bulbs only underscores the argument for switching to LEDs. But that ignores the larger implications of this strange bit of corporate malfeasance.

Consider, for example, that today’s LED lighting industry resembles the incandescent business a century ago: a hyper-competitive market dealing in a product that’s touted as lasting forever. The modern-day incarnation of Philips, for example, claims their product lasts 50,000 hours.

That may be correct, for now at least. But as the firms behind Phoebus understood, selling bulbs that never burn out isn’t a viable business model. As a consequence, LED manufacturers will soon face an unpleasant choice: go out of business or shorten bulb life, dramatically undercutting the technology’s earth-friendly claims.

If that happens, pushing LEDs may not turn out to be such a bright idea after all.

More From Other Writers at Bloomberg Opinion:

• The Economy-Changing Power of the LED Bulb: Justin Fox
• Saving the Planet One Light Bulb at a Time: Mark Gilbert
• Need a Light Bulb? Uncle Sam Gets to Choose: Virginia Postrel

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Stephen Mihm, a professor of history at the University of Georgia, is a contributor to Bloomberg Opinion.

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