Definition of cartel

What is a poster?

A cartel is an organization created from a formal agreement between a group of producers of a good or service to regulate the supply in order to regulate or manipulate prices. In other words, a cartel is a group of independent companies or countries that act together as if they were a single producer and, therefore, can set prices for the goods they produce and the services they provide, without competition.

Key takeaways

  • A cartel is a collection of independent companies or organizations that collude to manipulate the price of a product or service.
  • The cartels are competitors in the same industry and seek to reduce that competition by controlling the price by mutual agreement.
  • The tactics used by the cartels include reducing supply, fixing prices, collusive bidding, and dividing the market.
  • In most regions, cartels are considered illegal and promoters of anti-competitive practices.
  • Cartels’ actions hurt consumers primarily through rising prices and a lack of transparency.

Understanding a poster

A cartel has less control over an industry than a monopoly, a situation in which a single group or company owns all or nearly all of the market for a given product or service. Some cartels are formed to influence the price of legally traded goods and services, while others exist in illegal industries, such as drug trafficking. In the United States, virtually all cartels, regardless of their line of business, are illegal under US antitrust laws.

Cartels have a negative effect on 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 main political goals. In doing so, it has identified four main categories that define how cartels behave: pricing, production restrictions, market allocation, and bid rigging (the submission of collusive bids).

Disadvantages of a poster

Cartels operate to the detriment of the consumer, since their activities aim to increase the price of a product or service above the market price. However, their behavior has an adverse impact in other ways as well. Posters discourage new entrants to the market, acting as a barrier to entry. Lack of competition due to pricing agreements leads to a lack of innovation.

In non-collusive agreements, companies would seek to improve their production or product to obtain a competitive advantage. In a cartel, these companies have no incentive to do so.

The largest poster in the world

The Organization of the Petroleum Exporting Countries (OPEC) is the world’s largest cartel. It is a group of 13 oil-producing countries whose mission is to coordinate and unify the oil policies of its member countries and ensure the stabilization of oil markets. OPEC activities are legal because US foreign trade laws protect them.

Amid controversy in the mid-2000s, concerns about retaliation and possible negative effects on American companies led to the blocking of the US Congress’s attempt to penalize OPEC as an illegal cartel. Despite OPEC being viewed by most as a cartel, OPEC members have argued that 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 meet the technical definition of cartels. They are loosely affiliated groups that establish rules among themselves to control the price and supply of a good, namely illegal drugs.

The best known example of this is the MedellĂ­n Cartel, which was led by Pablo Escobar in the 1980s until his death in 1993. The cartel trafficked large amounts of cocaine to the United States and was known for its violent methods.

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Mark Holland

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