A 

cartel is a group of producers who collude to restrict output, maintain high prices,
and maximize their joint revenue. In doing so they act as a monopoly, a single
producer that sets market price. Such collusion is usually formalized in an explicit
agreement, which may or may not be published. Cartel agreements are fragile, in
part because they are often illegal. The agreements are at risk of being canceled if
the authorities discover them. In the United States, the 1890 Sherman Antitrust Act
bans the type of collusion that leads to cartels, but enforcement of this Act and other
antitrust legislation can be difficult. A common type of cartel is one where producers
allocate territories to each of their members so they become local monopolies.
Cartels are illegal in many countries. The infamous "drug cartels" that distribute
narcotics in the United States and elsewhere are probably not formalized and so do
not fully qualify as cartels, but they are likely to exhibit many of the typical
characteristics of a cartel (including division of territory and price fixing).

To evade antitrust legislation, firms may form cartels in ways that are difficult to
detect, such as setting common technical standards among producers to limit
competition. For example, in the German car industry, the major car manufacturers
—Audi AG, BMW, Daimler AG, Porsche AG, and Volkswagen—set a suboptimal
common standard for diesel engine emissions and even agreed to such details as a
maximum speed for closing the soft top on a convertible. International cartels that
are agreed between national authorities may be tolerated even by other countries
that ban cartels on their own soil simply because they are too powerful to outlaw.
The Organization of the Petroleum Exporting Countries (OPEC), the largest cartel in
the world, is a prominent example. OPEC meets periodically to influence the
international price of crude oil by limiting or expanding national production quotas.

A cartel is inherently unstable because a producer can gain from breaking the
agreement. Cartels maximize profit for the group, but if a member of the cartel sees
opportunities for its individual profits to increase by breaking its agreement with the
cartel, it can do so. For example, if OPEC agrees to collectively cut oil production to
raise the oil price, one of its member countries can obtain higher profits
by expanding output and selling it at the higher price. Another cartel, the Belarusian
Potash Company (BPC), supplied one-third of the global potash production between
2005 and 2013. The cartel broke up when one of its members, the Russian potash
fertilizer producer Uralkali, decided to pull out, causing the world potash price to
drop. In the years since the breakup, potash prices have spiked every time there is a
rumor the cartel will be restored.