What's Wrong with Cartels?

Abstract

Cartels have a significantly negative impact on economic welfare. Anti-cartel competition law–such as the provisions of pt IV div 1 of the Competition and Consumer Act 2010 (Cth)–tries to tackle this negative impact through civil and criminal remedies. The prohibition of cartels is most commonly justified on economic grounds. However, reference is also often made to broader moral grounds for proscribing cartels–for example, it is commonly stated that cartels are deceptive, unfair or engaged in a form of cheating. This article advances a unified account of the moral status of cartels that integrates both economic and moral factors. It does so by emphasising the relationship of cartel behaviour to the moral duty to promote the common good. Cartels are wrong because they undermine the role of open and competitive markets as a salient response to an important social coordination problem in a way that leads to seriously harmful economic outcomes. This combination of factors supplies a robust justification for both civil and criminal sanctions in appropriate cases, thereby affording a principled foundation for the current framework of cartel regulation in Australia.