ECONOMIC OF GLOBAL TRADE & FINANCE

Economic of Integation- Cartel.

M-com- 1
By
Mangesh Barhate
Roll No: 25


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CONTENT
What is Cartel?
Facts of Cartels.
Definition.
Type of Cartels.
Cartel success.
Why cartel often fail.
Detecting cheat.
OPEC
American anti-trust law.
Cartels in India.
Conclusion.


WHAT IS CARTEL ?
A Cartel is formal agreement
among competing firms. It is a formal organization of
producers and manufacturers that agree to fix prices,
marketing, and production.
Cartels usually occur in an oligopolistic industry.
A group of parties, factions, or nations united in a
common cause; a bloc.


Firms form a cartel so that they can raise
Profits


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FACTS OF CARTELS
The name is derived from Edmund Cartel and
Georges Cartel. The aim of such collusion is to
increase individual members' profits by reducing
competition. Cartels usually occur in an
Oligopolistic Industry .Cartel members may agree
on matters as Price Fixing Total Industry Output ,
Market Shares, Allocation Of Customers
'

A cartel is a collection of businesses or countries that act
together as a single producer and agree to influence prices
for certain goods and services by controlling production
and marketing. A cartel has less command over an industry
than a monopoly - a situation where a single group or
company owns all or nearly all of a given product or
service's market
Definition of 'Cartel'

CARTEL
PUBLIC CARTEL
DEPRESSION
CARTEL
CRISIS CARTEL
PRIVATE CARTEL
Types of
cartel
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Conditions for cartel success
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Cheating can be detected and prevented
Low expectation of severe government
punishment

Low organizational costs

Cartel controls market
They earn greater profit by coordinating their activities
rather than acting independently
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firms don't
cooperate due
to a lack of
trust
Firms cheat
Produce extra
output (or
lower the price)
Why Cartels often fail ?
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Detecting Cartels
Detecting
Cartels
Structural
Methodology
Behavioral
Methodology
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Structural
Methodology
Number of Firms
Concentration and
Firms Size
Demand Variability
Capacity Utilization
Cost/Expense to Sales
Ratio
Entry Barriers
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Examples
Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar,
Saudi Arabia, the United Arab Emirates, and Venezuela.
Cartel of twelve countries
Mechanism for implementing production restrictions.
Incentives to cheat
Enforcement requires detection and effective penalties.
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In the United States, cartels are illegal; however, the
Organization of Petroleum Exporting Countries (OPEC) -
the world's largest cartel - is protected by U.S. foreign trade
laws.
Refers to seven oil companies that dominated mid 20th century
oil production, refining, and distribution


According to a report, 56 per cent of cartel complaints
relate to the petrol sector.
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AMERICAN ANTITRUST LAW
The Clayton Act and its Amendments
Clayton Act 1914
Robinson-Patman Act 1936
Cellar-Kefauver Act 1950

These Acts prohibit the following practices only if they
substantially lessen competition or create monopoly.

AMERICAN ANTITRUST LAW
The Clayton Act and its Amendments
1. Contracts that prevent a buyer from reselling a
product outside a specified area (called territorial
confinement).
2. Acquiring competitors shares or assets.
3. Interlocking directorships among competing firms.

Cartels in India
Cartels in Soda Ash
In 1996 (ANSAC) comprising of 6
American producers.
Attempted to ship a consignment @
cartelize price but held by MRTP
Cartelization in the bidding process of
Railways
Cartelization in the Cement Industry in
India
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Conclusion
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Cartel agreements are economically unstable.
Once a cartel is broken, the incentives to form the
cartel return and the cartel may be re-formed.
International and national cartels are hard to burst.
Cartels do not abolish competition, but regulate it.
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