cartel

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cartel

(kärtĕl`), national or international organization of manufacturers or traders allied by agreement to fix prices, limit supply, divide markets, or to fix quotas for sales, manufacture, or division of profits among the member firms. In that it often has international scope the cartel is broader than the trusttrust,
in law, arrangement whereby property legally owned by one person is administered for the benefit of another. Three parties are ordinarily needed for the relation to arise: the settlor, who bequeaths or deeds the property for another's benefit; the trustee, in whose hands
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, and in that it carries on manufacture it differs from the speculative cornercorner,
securing of all or nearly all the supply of any commodity or stock so that its buyers are forced to pay exorbitant prices. Corners may be planned deliberately or may be brought about unintentionally, as through a fight for controlling interest in a corporation's stock.
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 or ring. The existence of cartels is in opposition to classic theories of economic competition and the free market, and they are forbidden by law in many nations. In Germany, however, by the outset of World War II, nearly all industry was controlled by cartels closely supervised by the government. Opponents of cartels have alleged that they have driven competing firms out of existence, reduced volume of trade, raised prices to consumers, and protected inefficient members from competition. Cartels were blamed for having benefited German aggression by furnishing markets, profits, and technical data to Germany before World War II. Supporters of cartels claim that they protect the weaker participating firms, do away to an extent with limitations on trade resulting from high tariffs, distribute risks and profits equitably, stabilize markets, reduce costs, and hence protect consumers. The U.S. government legalized export associations in 1918 and has itself participated in agreements regulating production and international trade in foodstuffs, rubber, and other commodities. Because they imply the agreement and supervision of several governments, cartels in international trade are usually felt to be less harmful than those that tend to create monopolies in the home market for participants. Formal international agreements, involving governments as well as private firms, still control price, output, and distribution in some industries, notably in diamonds and in oil. Although not referred to as cartels, these agreements have the same general effect on world trade. The Organization of Petroleum Exporting CountriesOrganization of Petroleum Exporting Countries
(OPEC), multinational organization (est. 1960, formally constituted 1961) that coordinates petroleum policies and economic aid among oil-producing nations.
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 (OPEC) provides an outstanding example of the complex synergy of economics, politics, and international affairs that is involved in the dealings of large cartels. The term cartel is also used to describe the large criminal gangs in the illegal drug trade, especially those in Latin America, that dominate in certain regions or control certain aspects of the trade. See also tarifftariff,
tax on imported and, more rarely, exported goods. It is also called a customs duty. Tariffs may be distinguished from other taxes in that their predominant purpose is not financial but economic—not to increase a nation's revenue but to protect domestic industries
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.

Bibliography

See E. Kefauver, In a Few Hands (1965); H. Kronstein, The Law of International Cartels (1973); J. Hobson, Cartels, Trusts, and the Economic Power of Bankers, Financiers, and Money-Moguls (1985).

Cartel

 

a form of monopolistic agreement among companies, usually belonging to one economic sector, for the purpose of extracting monopolistic profits through quotas regulating the volume of production and of products marketed for all its basic participants. One of the forms of cartel agreements is the syndicate. The development of cartel agreements has also involved partial exchange of commercial information, standardization of accounting, and the organizing of patent pools for joint purchase and use of patents. In the cartel, as in any form of monopolistic practice, capitalist efficiency and technical progress are intertwined with elements of stagnation and decay. In the present-day scientific and technical revolution, however, the cartel is the most flexible form of monopoly concentration, and this fact has determined certain characteristics of its development.

Cartels arose at the end of the 19th century as a result of the concentration of production and the centralization of capital. In the first half of the 20th century they became particularly widespread in Germany. The American antitrust laws prohibited the monopolization of particular spheres of business activity, above all the formation of cartels. This legislation accelerated the process of mergers and absorption and the formation of holding companies and other developed forms of monopolistic concentration. In those sectors lacking an appropriate level of production concentration for the appearance of monoplies, cartels continued to exist in disguised form.

In the mid-1950’s and early 1960’s domestic cartels developed in the Western European countries. During these years laws were passed making the registration of cartels compulsory. The purpose of such legislation was to foster monoplization on the basis of more rapid concentration of production. Although state registration does impose a number of limitations on the preservation of old cartels and the formation of new ones, this form of monopolization became widespread in Western Europe. In Great Britain, where registration of cartels was made compulsory in 1956, 2, 240 applications had been submitted by the end of 1958. In the Netherlands the new law went into effect in 1958, and 1, 133 cartels were registered by the beginning of 1960. In 1960 there were 925 cartels in Sweden; in 1958, Denmark had 925. In West Germany and Japan, where more rigid restrictions have been instituted, the number of officially registered cartels is much smaller. Along with the domestic cartels many international ones have arisen in the 20th century, especially in the world capitalist markets for raw materials and intermediate goods.

Under present conditions, with a high level of concentrationof production and capital, most of the developed capitalist coun-tries are witnessing the rise of various forms of agreementsamong large companies, based on such factors as “mutual under-standing,” knowledge of the market, mutual observance of unstated quotas, and hidden agreements on price changes. These agreements are more effective than the old cartels in ensuring a monopoly in the market; unlike the old cartels, which regulated the marketing practices of numerous medium-size and small companies, the new arrangements guarantee a monopoly for a few large sellers. Cartels are now being supplanted by combinations known as conglomerates, which are built on a production and scientific-technical basis and incidentally perform cartel functions.

IU. B. KOCHEVRIN

cartel

1. Economics a collusive international association of independent enterprises formed to monopolize production and distribution of a product or service, control prices, etc.
2. Politics an alliance of parties or interests to further common aims
References in periodicals archive ?
In the name of efficiency, governments have pursued harmonization of their tax structures--a requirement for European Union member nations--which essentially cartelizes tax systems and limits competition.
It is the monopoly counterfeiter, the creator of State money; it cartelizes, privileges and bails out banks; it regulates--or attempts to regulate--money and credit, price levels, and the economy itself.
The Institute for Justice, for example, recently filed suit against the Louisiana Horticulture Commission, which cartelizes florists.