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Relationshipe between cartel crime and corporate governance - Literature review Example

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The cartels theory states that a conglomeration of companies reach a deal that they fix prices of certain similar products that they all supply with the main aim of overcharging their consumers or customers. They do this through abiding by their argument that they can…
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Relationshipe between cartel crime and corporate governance
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Download file to see previous pages In a number of jurisdictions, market sharing and price fixing for all purposes and intent are all constitutional violations. However, some people have argued that price fixing curbs destructive or unhealthy competition especially in oligopolistic industries. Assertion from other quarters is of the opinion that Collusion and cartels are no real threat to the market since they are majorly unstable and temporary in nature. This emanates from the fact that cartels are usually united by common interests at the beginning but in later stages, each diverts to pursue and protect its own interest which makes the whole system crumble. In most cases after agreeing to apply a uniform market price, one of the firms within the cartel usually cheats the other by lowering the prices of its products in order to maximize its customer base which in turn translates to profits (Rizza 44, 2012).
It is therefore argued that collusion between members of a cartel never long lasts because their exists a general mistrust among them and no clear channel to discipline any member of the cartel who by any means is proved to be violating terms of agrrement.In circumstances of implicit collusion, the problem is magnified because of lack of effective communication channels among the cartel members. Economically, price fixing being just a mere cartel or a heinous crime is judged by whether it adds value to the economic viability or not. If the economy is boosted through cartel collusion then some people have argued that it is economically viable.
The theory just discussed has majorly been applied in two ways. Firstly, to take note of those industries that may be susceptible or otherwise and their effectiveness to cartelization. Secondly, how remedies can be effectively devised that destabilizes and detect cartels which would ultimately scuttle their incidence. Initially fronted by George Stigler and later modified by other ...Download file to see next pagesRead More
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