ECONOMIC OF GLOBAL TRADE & FINANCE

Economic of Integation- Cartel.

M-com- 1
By
Mangesh Barhate
Roll No: 25
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CONTENT
 What is Cartel?
 Facts of Cartels.
 Definition.
 Type of Cartels.
 Cartel success.
 Why cartel often fail.
 Detecting cheat.
 OPEC
 American anti-trust law.
 Cartels in India.
 Conclusion.
 WHAT IS CARTEL ?

A Cartel is formal “agreement’’

among competing firms. It is a formal organization of
producers and manufacturers that agree to fix
prices, marketing, and production.
Cartels usually occur in an oligopolistic industry.
A group of parties, factions, or nations united in a
common cause; a bloc.
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Firms form a cartel so that they can raise
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Profits
FACTS OF CARTELS
 The name is derived from Edmund Cartel and
Georges Cartel. The aim of such collusion is to
increase individual members' profits by reducing
competition. Cartels usually occur in an
Oligopolistic Industry .Cartel members may agree
on matters as Price Fixing Total Industry Output
, Market Shares, Allocation Of Customers
 '
Definition of 'Cartel'

A cartel is a collection of businesses or countries that act

together as a single producer and agree to influence prices
for certain goods and services by controlling production
and marketing. A cartel has less command over an industry
than a monopoly - a situation where a single group or
company owns all or nearly all of a given product or
service's market
 Types of
cartel

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DEPRESSION
CARTEL
PUBLIC CARTEL
CARTEL
CRISIS CARTEL

PRIVATE CARTEL
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 Conditions for cartel success

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Low organizational costs

Cartel controls market

Cheating can be detected and prevented

Low expectation of severe government

punishment

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They earn greater profit by coordinating their activities
rather than acting independently 10
 Why Cartels often fail ?

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firms don't
Produce extra
cooperate due
Firms “cheat” output (or
to a lack of
lower the price)
trust

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 Detecting Cartels

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Detecting
Cartels

Structural Behavioral
Methodology Methodology

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 Number of Firms

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Concentration and
Firms Size

Demand Variability
Structural
Methodology
Capacity Utilization

Cost/Expense to Sales
Ratio

Entry Barriers
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 Examples

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Cartel of twelve countries

Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Sa

udi Arabia, the United Arab Emirates, and Venezuela.

Mechanism for implementing production restrictions.

Incentives to cheat
Enforcement requires detection and effective penalties.

 In the United States, cartels are illegal; however, the

Organization of Petroleum Exporting Countries (OPEC) -
the world's largest cartel - is protected by U.S. foreign trade
laws. 14
Refers to seven oil companies that dominated mid 20th century

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oil production, refining, and distribution

According to a report, 56 per cent of cartel complaints 15

relate to the petrol sector.
AMERICAN ANTITRUST LAW
The Clayton Act and its Amendments
Clayton Act 1914
Robinson-Patman Act 1936
Cellar-Kefauver Act 1950

These Acts prohibit the following practices only if they

substantially lessen competition or create monopoly.
AMERICAN ANTITRUST LAW
The Clayton Act and its Amendments
1. Contracts that prevent a buyer from reselling a
product outside a specified area (called territorial
confinement).
2. Acquiring competitor’s shares or assets.
3. Interlocking directorships among competing firms.
 Cartels in India

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Cartels in Soda Ash

• In 1996 (ANSAC) comprising of 6

American producers.
• Attempted to ship a consignment @
cartelize price but held by MRTP

Cartelization in the bidding process of

Railways

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Cartelization in the Cement Industry in
India
 Conclusion

 Cartel agreements are economically unstable.

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 Once a cartel is broken, the incentives to form the
cartel return and the cartel may be re-formed.

 International and national cartels are hard to burst.

 Cartels do not abolish competition, but regulate it.

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