Cartel

CARTEL

A cartel is a group of independently owned businesses that attempts to regulate pricing, production, and distribution within an industry. To accomplish this, cartel members agree to act together rather than compete against each other. As a result the cartel does not allow market forces to determine prices; instead the cartel decides how much to charge, how much to produce, and how to divide the market. The term cartel is usually applied to agreements that regulate business in the international marketplace. (Collaborative arrangements on a national level are called trusts.)

Cartels originated in Germany and date back to the 1870s. In the early years of the twentieth century the German government encouraged companies to join cartels as a way to increase Germany's export trade. During that same period the aluminum industry was entirely controlled by a cartel made up of four companies from the United States, France, Germany, and Great Britain.

After World War I (1914–1918) cartels flourished, and by the start of World War II (1939–1945) there were an estimated 200 international cartels. These cartels controlled 30 percent of worldwide trade in industries such as rubber, steel, chemicals, and tin. More recently, oil-exporting nations formed cartels in the 1970s to establish market prices for crude oil. These oil cartels, operating under the auspices of the Organization of Petroleum Exporting Countries (OPEC), initially enjoyed success in controlling the world's oil supply and prices. However as oil prices went up demand for oil decreased; by the 1980s OPEC's influence eroded. While antitrust laws make collusive agreements illegal in the United States, national cartels are common in Japan, where businesses operate under a system of managed competition.

See also: OPEC Oil Embargo