The cartel has always been a disastrous operation for the economy. Along with the syndicate and the trust, this is a procedure prohibited at the legislative level. The cartel and its negative impact on the economy will be discussed in this article.
The concept of cartel conspiracy
So what is a cartel? What is its impact on economic and even social relations?
Cartel conspiracy is an arrangement between two or more companies. It can be both written and oral. This arrangement is aimed at severely restricting competition and, therefore, at making more profit.
A cartel agreement is always monopolistic. This makes this conspiracy illegal in many states. This also adds the desire to regulate prices, produce products and conduct marketing operations independently. Due to such actions, the output is significantly worsened, the available production capacities are limited. Legal entities bear administrative, and sometimes criminal liability for cartel conspiracy.
Goals and objectives of cartel agreements
The main goal of all those people who organize cartel conspiracy is, of course, easy to calculate. This is almost a complete removal of competition in a certain market segment (as a rule, manufacturers consider some sectors and sales areas as their own, although in reality they are not). Having received a controlled market, manufacturers dictate their policies on it: their conditions and rules. It is because of this that they can set the most convenient and optimal prices for themselves.
It is foolish to deny the fact that in today's market development of a monopoly can not be avoided. Banal human greed forces producers to unite and increase their own income by raising prices and lowering the output of goods. Of course, this has an extremely negative effect on ordinary segments of the population: prices are rising, and product quality is deteriorating.
Types of cartels depending on the type of collusion
There are many classifications of cartel types. Only the most basic and well-known types of cartel agreements will be listed below.
Depending on the type of collusion, cartels are divided into two main types: horizontal and vertical. How do they differ from each other? Everything is pretty simple here. Vertical cartel conspiracy is the conclusion of an agreement between enterprises (two or more) from completely different fields of activity. Enterprises completely different from each other (for example, meat processing and timber, metallurgical and aircraft manufacturing, etc.) are aimed at limiting the flexibility of the market and establishing a monopoly. Accordingly, horizontal cartels represent a written or verbal conspiracy of companies from one industry.
Types of cartels depending on the type of activity
World practice distinguishes the following types of cartel agreements:
- Fractional cartel agreements. They are divided into quota and territorial. In the first case, participants in an illegal agreement regulate market pricing through quotas. In the second case, competition is gradually removed - by providing the participants in the conspiracy with sales territories.
- Cash cartel agreements. Equal terms of delivery and payments are approved along with standardized prices.
- Air conditioning cartels. Detailed agreements confirm certain conditions for the sale of products.
- Purchasing cartels. Quite common agreements. Their essence is to bring down purchase prices by purchasing several enterprises of the same (or a certain type) of products.
- Costing cartel conspiracy. In this case, the enterprises agree among themselves to pursue almost the same policy: with similar calculations, a similar structure, etc.
There are many other types of cartel agreements. However, a certain trend between all types and types of such conspiracies is, of course, visible. These are the same prices, joint marketing, limiting or increasing production capacities, etc.
About organizing cartels
Cartel conspiracy between producers can be made verbally or in writing.
Most often, the formation and development of a cartel conspiracy is influenced by the relations of producers that this conspiracy can conclude. Simply put, the closer and friendlier the heads of companies are to each other, the higher the likelihood of an illegal transaction between them. The same and vice versa.
The favorite tactic of the leaders of any companies is to conclude a cartel conspiracy in the conditions of a small number of manufacturers on the market. The fact is that the absence of a large number of companies contributes to the quick and easy formation of illegal collusion between manufacturers. If there are too many companies, then the cartel itself will be extremely inefficient: there will be many costs and expenses; and the probability of its disclosure will be many times higher.
Cartel Development Factors
There are a number of factors that can significantly affect the efficiency of cartels.
Many manufacturers always pay attention to the presence of such factors. After all, cartel agreements are never concluded spontaneously. So, what are the signs of a cartel conspiracy, its fruitful work?
Significantly affect the development of the cartel agreement may type of product. The thing is that horizontal cartels are formed much more often, because it is simply more convenient and efficient. However, such a scheme does not always work. For example, it will be much more difficult to create a horizontal cartel in conditions of strong differentiation of products on the market.
The next factor is the ease of forecasting demand. In conditions of stable, easily predictable demand, making a cartel conspiracy will be much easier. It will be easy to prove such a scheme if you look at states with an unstable market. After all, there are practically no cartels there - they are simply not justified.
And finally, the most important and important factor in the productivity of cartel conspiracies: antitrust law in the state (or rather, its features). There are a number of countries where cartels are not prohibited by law. In this case, the conclusion of various agreements between manufacturers is justified and legal. And vice versa, with states in which cartels are prosecuted. The conclusion of a contract in such countries is very risky and as a result is minimized. However, it is worth considering one extremely interesting detail: in states where cartels are prohibited by law, the conclusion of a cartel conspiracy will be much more productive for producers than in countries where they are legalized.
About the dangers of cartel agreements
Of course, cartels have a very negative impact on both the economic and social spheres of life. But still it’s worth a little more understanding: what does cartel conspiracy entail? Judicial practice highlights the many negative consequences of such agreements.
Firstly, it is discrimination against various market participants.
This picture is especially evident in cases when there are not so many manufacturers on the market. The companies united in the cartel put pressure on other enterprises - all so that they also enter the deal. There is a direct violation of rights. Secondly, it is the imposition of certain conditions on companies that have decided to enter into a conspiracy. Here you can observe the lack of independence of manufacturers. And thirdly, this is the creation of an overly overpriced and, as a rule, low-quality product. In this case, the cartel directly harms ordinary people. The law of the Russian Federation prohibits any action, one way or another aimed at restricting competition. That is why any cartel conspiracy of the Criminal Code of the Russian Federation is considered unlawful and blames it.
Cartels in the USA and Europe
In the West, a cartel is a special form of transaction. It is not recognized as illegal anytime, anywhere. In principle, in European countries it is possible to organize a cartel, and even legally. However, there is one extremely interesting detail.
The fact is that in Europe cartel transactions are divided into "harmful" and "desirable". Companies that have concluded such an agreement among themselves should only benefit the state economy. Naturally, in a cartel, it is rather difficult to do this. However, when it is required to reach more consumers or increase income, the state will only encourage such organizations. The reverse situation is with “harmful” cartels. Such organizations often have conflicts with the authorities. The state is trying in every possible way to combat “unwanted” cartels.
Examples of cartel conspiracy in the West are in the hundreds. OPEC (an association of states in the field of mining), for example, the most striking of them. After all, it is distinguished by the fact that it can be called a real cartel conspiracy between states. By the way, it was with OPEC that many scandals were connected. Several times this organization was even on the verge of closure.
How is the fight against cartels in different countries?
Western countries are trying to fight cartel organizations by imposing fines on them. In the USA, for example, the amount of the fine for legal entities reaches $ 100 million, for individuals - 1 million.
However, the penalty can be calculated as double the amount of profit or loss. In this case, participants in a cartel conspiracy will have to pay the state even billions.
In the Russian Federation, the fight against cartels is being carried out by the prosecutor's office together with the police. There is a special department that investigates cases of monopoly policy in the market. The fine for a cartel conspiracy in Russia can reach 20 thousand rubles for officials and 0.15 of the amount earned illegally for legal entities.
The problem of fighting cartels
Of course, the fight against cartel organizations is often criticized. And all because of the extremely illiterate antitrust policy. For example, a manufacturer decided to lower it slightly, or, conversely, raise prices for its products. In this case, it is already possible to draw up a statement of cartel conspiracy, which in fact, of course, did not exist.
There are many economic theories that state that fighting cartels does more harm than good. To some extent, this is true. After all, there are examples when excessively high prices of producers organized in a cartel served as a kind of signal for other companies, which, in turn, lowered prices and enriched themselves through this. One way or another, today the cartel is outlawed. Any company, manufacturer or ordinary official can file an application with the FAS for cartel conspiracy. A sample of such a statement is presented below.
Cartel Stability Issue
Of course, manufacturers from cartel conspiracy receive many benefits. However, companies may also have problems.
The issue in this case is not about problems with the law: the whole thing is that the cartel is a very short-lived phenomenon, which also requires special attention from all the participants who concluded it. The cartel will stand or not stand - depends only on its members. The incentive of all manufacturers that have concluded a contract is very important. After all, at least one participant in a cartel conspiracy should deceive other participants and violate certain pre-established conditions, as the whole cartel will collapse.
Cartels have always been and will be short-lived, temporary organizations. Such illegal agreements are more likely to collapse themselves than the state will arrest them. The thing is that different companies that conclude a cartel conspiracy have completely different demand, cost, etc. curves. As a result, people who conclude a cartel agreement among themselves take very big risks, because the probability of harming themselves is very high.