Cartel

In English, the word was originally used for a written agreement between warring nations to regulate the treatment and exchange of prisoners[10] from the 1690s onward.

Cartels have many structures and functions that ideally enable corporations to navigate and control market uncertainties and gain collusive profits within their industry.

A typical cartel often requires what competition authorities refer to as a CAU (Contact, Agreement or Understanding).

When the agreement to control prices is sanctioned by a multilateral treaty or protected by national sovereignty, no antitrust actions may be initiated.

[28][29] Drawing upon research on organizational misconduct, scholars in economics, sociology and management have studied the organization of cartels.

It was pioneered in 1883 by the Austrian economist Friedrich Kleinwächter and in its early stages was developed mainly by German-speaking scholars.

The American viewpoint, supported by activists like Thurman Arnold and Harley M. Kilgore, eventually prevailed when governmental policy in Washington could have a larger impact in World War II.

Prior to World War II, members of cartels could sign contracts that were enforceable in courts of law except in the United States.

[35] In U.S. v. National Lead Co. et al., the Supreme Court of the United States noted the testimony of individuals who cited that a cartel, in its versatile form, is a combination of producers for the purpose of regulating production and, frequently, prices, and an association by agreement of companies or sections of companies having common interests so as to prevent extreme or unfair competition.

[36] The first legislation against cartels to be enforced was the Sherman Act 1890, which also prohibits price fixing, market-sharing, output restrictions and other anti-competitive conduct.

Economic analysis is implemented to identify any discrepancies in market behaviour between both suspected and unsuspected cartel engaged firms.

A structural approach is done in the form of screening already suspicious firms for industry traits of a typical cartel price path.

For example, studies have shown that industries are more likely to experience collusion where there are fewer firms, products are homogeneous and there is a stable demand.

[43] The underlying principle of a leniency program is to offer discretionary penalty reductions for corporations or individuals who are affiliated with cartel operations, in exchange for their cooperation with enforcement authorities in helping to identify and penalise other participating members.

[46] Some prosecuted examples include: Today, price fixing by private entities is illegal under the antitrust laws of more than 140 countries.

The commodities of prosecuted international cartels include lysine, citric acid, graphite electrodes, and bulk vitamins.

[50] In many countries, the predominant belief is that cartels are contrary to free and fair competition, considered the backbone of political democracy.