What is a cartel?

A cartel is an association of entrepreneurs on the basis of an agreement that specifies the conditions binding on all participants regarding output, prices, and sales policy. At the same time, cartel members have legal and economic independence and act only within the framework of the established agreement.

Instruction manual

1

Typically, cartels combine enterprises of the same industry. They conclude an agreement regarding the economic aspects of the activity: the sales market, price level, production volume, product range, hiring of labor, etc.

2

A cartel usually does not have a distinct head link, enterprises that are part of the cartel retain their independence, and an agreement between the participants is a result of meetings and negotiations between the management of production organizations.

3

A cartel as a type of business combination has some features:

- the association is based on a contract, i.e. conspiracy of a group of manufacturers in order to exclude competition between them and obtain monopoly profits;

- cartel participants retain ownership of their organizations, ensuring their financial, economic and legal independence;

- the cartel usually includes enterprises of the same industry;

- enterprises participating in the cartel sell products together, and often - and produce them;

- there is a system of coercion and restrictions in the cartel, and sanctions established by the contract are applied to violators.

4

Since in many countries monopoly legislation is currently in force, cartel associations are prohibited. The exception is agricultural cartels, as well as those associations that meet the conditions below. So, the ban on the formation of a cartel is lifted if:

- the cartel has a small market share;

- the activity of the cartel is based on the development of a new market;

- cartels bring economic benefits to the whole country.

5

The most effective in their activities are cartels, which not only set uniform prices and carry out joint sales, but limit production by setting quotas on the volume of output and thereby regulate production capacities.