2 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.
Firms form a cartel so that they can raise Profits
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5 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 '
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 Definition of 'Cartel'
CARTEL PUBLIC CARTEL DEPRESSION CARTEL CRISIS CARTEL PRIVATE CARTEL Types of cartel 1 4 - O c t - 1 4
8 Conditions for cartel success 1 4 - O c t - 1 4
9 Cheating can be detected and prevented Low expectation of severe government punishment
Low organizational costs
Cartel controls market They earn greater profit by coordinating their activities rather than acting independently 1 4 - O c t - 1 4
10 firms don't cooperate due to a lack of trust Firms cheat Produce extra output (or lower the price) Why Cartels often fail ? 1 4 - O c t - 1 4
11 Detecting Cartels Detecting Cartels Structural Methodology Behavioral Methodology 1 4 - O c t - 1 4
12 Structural Methodology Number of Firms Concentration and Firms Size Demand Variability Capacity Utilization Cost/Expense to Sales Ratio Entry Barriers 1 4 - O c t - 1 4
13 Examples Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela. Cartel of twelve countries Mechanism for implementing production restrictions. Incentives to cheat Enforcement requires detection and effective penalties. 1 4 - O c t - 1 4
14 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. Refers to seven oil companies that dominated mid 20th century oil production, refining, and distribution
According to a report, 56 per cent of cartel complaints relate to the petrol sector. 1 4 - O c t - 1 4
15 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 competitors shares or assets. 3. Interlocking directorships among competing firms.
Cartels in India 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 Cartelization in the Cement Industry in India 1 4 - O c t - 1 4
18 Conclusion 1 4 - O c t - 1 4
19 Cartel agreements are economically unstable. 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. 14-Oct-14 20