Cartel
For the American pop-punk band, see Cartel (band).A
cartel is a group of formally independent producers whose goal it is to
fix prices, to limit
supply and to limit
competition. Cartels are prohibited by
antitrust laws in most countries; however, they continue to exist nationally and internationally, formally and informally. Note that a single entity that holds a
monopoly by this definition cannot be a cartel, though it may be guilty of abusing said monopoly in other ways. As such, it is inaccurate to describe (for example) Microsoft or AT&T as cartels. Cartels usually occur in
oligopolies, where there are a small number of sellers.
In general, cartels are
economically unstable in that there is a great
incentive for members to cheat and to sell more than the
quotas set by the cartel (see also
game theory). This has caused many cartels that attempt to set product
prices to be unsuccessful in the
long term. Empirical studies of
20th century cartels have determined that the mean duration of discovered cartels is from 5 to 8 years. However, once a cartel is broken, the incentives to form the cartel return and the cartel may be re-formed. Publicly-known cartels that do not follow this
cycle include the
De Beers diamond cartel and the
Organization of the Petroleum Exporting Countries (OPEC).
Price fixing is often practiced internationally. When the agreement to control price is sanctioned by a multilateral
treaty or protected by national sovereignty, no antitrust actions may be initiated. Examples of such price fixing include oil whose price is partly controlled by the supply by OPEC countries. Also international airline tickets have prices fixed by agreement with the
IATA, a practice for which there is a specific exception in antitrust law.
International price fixing by private entities can be prosecuted under the antitrust laws of more than 100 countries. Examples of prosecuted international cartels are
lysine,
citric acid,
graphite electrodes, and bulk
vitamins.
De Beers has long controlled diamond production and prices from its stronghold in
South Africa. Recently they have been implicated in sectarian violence in several African countries, including
Sierra Leone and
Côte d'Ivoire. De Beers has faced strong criticism recently (see articles on
blood diamonds), and may be expected to face competition from
synthetic diamonds in the next few years.
OPEC: As its name suggests, OPEC is organised by
sovereign states. It cannot be held to antitrust enforcement in other
jurisdictions by virtue of the
doctrine of
state immunity under
public international law. However, members of the group do frequently break rank to increase production quotas.
Many
trade organizations, especially in
industries dominated by only a few major companies, have been accused of being fronts for cartels:
People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.Adam Smith, The Wealth of Nations,
1776Some, usually critics of
labor unions, claim exactly the same applies to
trade unions, which allegedly act like cartels (being a group of producers) with similar benefits and drawbacks.
An example of a new international cartel is the one created by the members of the
Asian Racing Federation and documented in the
Good Neighbour Policy signed on
September 1,
2003.
*
Collusion*
Oligopoly*
Tacit collusion*
Content cartel*
Drug cartel*
Phoebus cartel*
Zaibatsu*
Competition regulator*
International Cartel History Site*
The Food and Global Agricultural Cartels of the 1990s
