Business, Legal & Accounting Glossary
a consortium of independent organizations formed to limit competition by controlling the production and distribution of a product or service
n. 1) an arrangement among supposedly independent corporations or national monopolies in the same industrial or resource development field organized to control distribution, set prices, reduce competition, and sometimes share technical expertise. Often the participants are multinational corporations which operate across numerous borders and have little or no loyalty to any home country, and great loyalty to profits. The most prominent cartel is OPEC (Organization of Petroleum Exporting Countries), which represents all of the oil-producing countries in the Middle East, North Africa and Venezuela. Many cartels operate behind a veil of secrecy, particularly since under American antitrust laws (the Sherman and Clayton Acts) they are illegal. 2) a criminal syndicate like the international drug cartel headquartered in Colombia.
A cartel is a formal agreement between firms engaged in the production and sale of the same product in order to exact and share monopolistic rents. Usually involving a small number of sellers, the terms of the agreement may include points like total industry output, price-fixing, allocation of territories, allocation of customers, market shares, bid-rigging, division of profits and setting up of common sales agencies.
The chief objective of a cartel is to maximize the benefits of the sellers. Reduction in competition and fixation of prices helps in earning more profits for individual members involved in the agreement. However, cartels are forbidden in certain countries including the USA because of the competition laws which have been implemented there.
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This glossary post was last updated: 26th April, 2020 | 0 Views.