Background to a cartel and oligopoly is provided, along with key definitions. The cost of cartel activity is considered upon the market along with relevant statutory provisions. Discussion of deterrence theory is provided. Problems with corporate fines is considered. The US and UK approach is discu...
‘People of the same trade seldom meet together, even for
merriment and diversion, but the conversation ends in a conspiracy
against the public, or in some contrivance to raise prices.’ Adam
Smith
‘Our competitors are our friends, and our customers are our
enemies’ Archer Daniels Midland Internal Motto in the 1990s.
Cartel = most serious violation of CL + no longer compete against
each other + efectivell gain power of a monopolist through agreements
Normally exploit that market power by fxing prices, reducing
output or sharing customers or markets
All of these activities increase costs for customers + increase proft
levels for cartel members
Harding and Joshua: An organisation of independent enterprises
from the same or similar area of economic activity, formed for the
purpose of promoting common economic interests bl controlling
competition between them
Cartel: Defined bl commission as an “illegal secret agreement
concluded between competitors to fx prices, restrict supply
and/or divide up markets. The agreement mal take a wide variety of
forms but often relates to sale prices or increases in such prices,
restrictions on sale or production capacities, sharing out of product or
geographic markets or customers and collusion on the other commercial
conditions for the sale of products or services ”
A horizontal agreement that generally falls within the defnition of
a cartel is one that seeks to: set prices, either directll, or bl manipulating
output, share consumers bl allocating them between suppliers directll or
bl allocating each supplier control over customers in a specific
geographical area, to agree to co-ordinating other terms and condition of
sale over which customers might expect sellers to compete
Initialll in Europe, cartels were received positively as brining
stability + order to markets but thel a change came through the 1927
Geneva Declaration of Cartels
Such agreements deemed ‘incompatible with the common market’.
Article 101 TFEU cases seemed to focus on specifc types of vertical
agreements, tlpified bl Consten & Grundig
Willingness to challenge ‘underground cartels’ in Dyestufs
Willingness to challenge less formal, better concealed, arrangements
Oligopoly:
A market structure with few sellers, who realise their
interdependence in taking strategic decisions, for instance on price,
output and qualitl In an oligopoll, each firm is aware that its market
behaviour will distinctll afect the other sellers and their market
behaviour As a result, each frm will take the possible reactions
from the other players expressly into account In competition cases,
the term is often also used for situations where a few big sellers jointly
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