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Cartel - Essay Example

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Cartel It is notably clear that the modern world economy is subject to the influence of globalization, technological advances, new market strategies, and business aspects. Individuals and corporations are using all means to establish a competitive advantage with a view of surviving and enjoy maximum returns…
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Extract of sample "Cartel"

Download file to see previous pages A cartel includes a secretive agreement between competing parties on total industry output levels, price fixing, credit conditions, and division of profits, bid rigging, discounts, customers, and areas to receive the supply, market shares, and/or businesses to win contracts (“Office of Fair Trading” 1). The main objectives of a cartel agreement are to inflate prices, increase individual profitability, and reduce competition in the industry. Cartels have adverse effects on the industry as they reduce choices, inflate market prices, and inhibit the overall economy (“Australian Competition and Consumer Commission” 1). As such, cartels are illegal in most countries and take place in secrecy where it is not easy to establish their existence. However, a cartel has less influence on an industry than a monopoly. A cartel can be local, national or international where ion the recent times cartels steal billions of dollars from the vulnerable customers every year (“Australian Competition and Consumer Commission” 1). We can classify cartels into public and private cartels. The government takes place in a public cartel where it implements the cartel agreement and defends the cartel from any liability as it seeks to benefits all the citizens. On the other hand, a private cartel is illegal under the antitrust laws as it seeks to benefit only the parties in the cartel agreement to the disadvantage of everybody else. As such, the Competition Act, Article 101 TFEU of the EC Treaty, the Enterprise Act (“Office of Fair Trading” 1), and EU competition law prohibit cartels that allows for price fixing, market sharing, limitation of production or supply or bid rigging (“European Commission” 1). Nevertheless, we still have cartels in the world, which include the controversial Organization of Petroleum Exporting Countries (OPEC), which is the world's largest cartel under the protection of U.S. foreign trade laws. As such, based on my understanding of a cartel, we can experience a cartel in different industries. This is because cartels can actually occur in almost any industry where it involves good or services at the manufacturing, distribution, or marketing levels. However, some industries are more prone to cartels compared to others because of their mode of operations or their organizational structure. Ideally, industries with few competitors, where the products have similar characteristics, where communication channels between competitors are already established, or where the industry is suffering from over supply are prone to cartels (“Office of Fair Trading” 1). More specifically, cartels usually take place in an oligopolistic industry where there are few sellers, barriers to entry, and homogeneous products. Like in most European nations, cartels are illegal in the United States of America. However, although many consider the Organization of Petroleum Exporting Countries (OPEC)as a cartel, the U.S. foreign trade laws protects it claiming it is an global organization with a legal, long-term, and significant objective. Nevertheless, cartels like drug cartels and all naked cartels are illegal in U.S. Notably, various agencies and legislations like the Competition and Consumer Act prohibits cartels under civil law and makes it a criminal offence for individuals and ...Download file to see next pages Read More
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