What is a Cartel

A cartel is an organization created from a formal agreement between a group of

producers of a good or service to regulate supply in an effort to regulate or
manipulate prices. In other words, a cartel is a collection of otherwise
independent businesses or countries that act together as if they were a single
producer and thus are able to fix prices for the goods they produce and the
services they render without competition.

BREAKING DOWN Cartel

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. Some cartels are formed to influence the price of legally traded
goods and services, while others exist in illegal industries, such as drugs. In the
United States, virtually all cartels, regardless of their line of business, are illegal
by virtue of American anti-trust laws.

Cartels have a negative effect for consumers because their existence results in
higher prices and restricted supply. The Organization for Economic Cooperation
and Development (OECD) has made the detection and prosecution of cartels
one of its priority policy objectives. In so doing, it has identified four major
categories that define how cartels conduct themselves: price fixing, output
restrictions, market allocation and bid rigging (the submission of collusive
tenders).

The World's Biggest Cartel

The Organization of Petroleum Exporting Countries (OPEC) is the world's largest
cartel. It is a grouping of 14 oil-producing countries whose mission is to
coordinate and unify the petroleum policies of its member countries and ensure
the stabilization of oil markets. OPEC's activities are legal because it is protected
by U.S. foreign trade laws.

Amid controversy in the mid-2000s, concerns over retaliation and potential

negative effects on U.S. businesses led to the blocking of the
U.S. Congressattempt to penalize OPEC as an illegal cartel. Despite the fact that
OPEC is considered by most to be a cartel, members of OPEC have maintained
it is not a cartel at all but rather an international organization with a legal,
permanent and necessary mission.

Illegal Activities
Drug trafficking organizations, especially in South America, are often referred to
as "drug cartels." These organizations do meet the technical definition of being
cartels. They are loosely affiliated groups who set rules among themselves to
control the price and supply of a good, namely illegal drugs.
The best-known example of this is the Medellin Cartel, which was headed by
Pablo Escobar in the 1980s until his death in 1993. The cartel famously trafficked
large amounts of cocaine into the United States and was known for its violent
methods.