Kartels

Kartels, or kartels, are formal agreements between competing firms that coordinate their market behavior. Common objectives include price fixing, market sharing, bid rigging, and production quotas. By agreeing on prices or outputs, cartel members aim to raise profits by reducing competition. They often appoint a lead firm or committee to set targets, monitor compliance, and enforce penalties for members who deviate.

Kartels may operate domestically or internationally and can occur in many sectors, including commodities, manufacturing, and services. They can be difficult to detect due to secrecy and complex schemes; signs include sudden price alignments, meetings among rivals, and unusual industry patterns.

Effects of kartels are typically harmful to welfare. Consumers and buyers pay higher prices, experience reduced product choice, and face slower innovation. While proponents sometimes claim efficiency gains, empirical evidence generally shows that cartelization reduces overall welfare and allocative efficiency.

Enforcement against kartels is a central concern of competition or antitrust authorities. Agencies pursue cartels through investigations, market monitoring, and the use of leniency programs that reward early admission of participation. Penalties can include substantial fines and, in some jurisdictions, criminal sanctions. International cooperation helps authorities uncover cross-border schemes and coordinate actions. While most market economies treat private cartels as illegal, some forms of state-managed coordination—such as in certain oil-producing blocs—are debated as differences from private cartels.

Examples often cited include oil-producing blocs commonly described as cartels, and historical cases such as international price-fixing arrangements in vitamins and other commodities.