Creating Global Alliance for Effective Mechanism Against Cartels

Abstract

The term “cartel” refers to the worst kind of such communication, as it deals with the creation of agreements to fix prices of goods and services at an artificially high level. Cartels are universally established as being the most pernicious form of agreement for competition regulators. The OECD refers to them as “the most egregious violations of competition law,” and has repeatedly found that one of the most important goals of Competition Policy must be to root out cartels. The European Union has repeatedly stated the harms caused by them in terms of reducing consumer welfare and distorting allocative efficiency. Small number of firms in an industry, high concentration, barriers to entry, low technological advancement, homogeneous product, strong ability of competing firms to exchange information on price and other terms of sale, uniformity in cost or efficiency, severe punishment which can be inflicted on the cheater, and effective trade association etc. make it conducive for firms to cartelize and to continue as such on a long term basis. The less fear of detection and punishment also encourages firms to cartelize.