Cartel .Final My Ppt

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PRESENTED TO:- PRESENTED BY:-Prof. Sandeep Agarwal Vikas Sexena B-08-55

Vishal Kumar Jaiswal B-08-57

CONTENT DEFINITION FACTS OF CARTELS TYPES OF CARTEL PUBLIC CARTEL DEPRESSION CARTEL CRISIS CARTEL PRIVATE CARTEL LONG-TERM UNSUSTAINABILITY OF CARTELS MONITORING A CARTEL EFFORTS TO CURB A CARTEL CARTELS THAT HAVE BEEN BUSTED

Definition

“A cartel refers to an agreement that businesses form to control prices , production or marketing arrangements and not compete with one another.”

FACTS OF CARTELSThe name is derived from Edmund Cartel and Georges Cartel.

The aim of such collusion is to increase individual members' profits by reducing competition.

Cartels usually occur in an Oligopolistic Industry .

Cartel members may agree on matters as Price Fixing, Total Industry Output, Market Shares, Allocation Of Customers, Allocation Of Territories, Bid Rigging, establishment of Common Sales Agencies, and the Division Of Profits or combination of these.

International cartels,( price fixing cartels in particular), are the most harmful to world economies.

It raises prices and restricts supply, and thus makes goods and services completely unavailable to some.

They target developing countries instead where competition law enforcement is not vigorous or where no competition law exists.

National action is not sufficient and needs to be complemented by cooperation among competition authorities.

TYPES OF CARTEL There are mainly two types of Cartel :-

1) PUBLIC CARTEL

a) Depression Cartel

b) Crisis Cartel

2) PRIVATE CARTEL

PUBLIC CARTEL In the case of PUBLIC CARTELS, the

government may establish and enforce the rules relating to prices, output and other such matters. Ex- Export cartels ,Shipping conferences , labor unions.

DEPRESSION CARTEL

Depression cartels have been permitted in many countries in industries deemed (keeping in mind) to be requiring price and production stability and/or to organize the system of industry structure and excess capacity.

Crisis Cartels have also been organized by governments for various industries or products in different countries in order to fix prices and ration production and distribution in periods of acute shortages.

CRISIS CARTEL

Private Cartels is a type of an agreement based on terms and conditions from which the members derive mutual advantage but which are not known or likely to be detected by outside parties.

In most of the jurisdictions, they are viewed as being illegal and in violation of antitrust laws.

PRIVATE CARTELS

LONG-TERM UNSUSTAINABILITY OF CARTELS

Prisoner's Dilemma Game The mean duration of discovered cartels is from 5

to 8 years . The longer the time firms in the cartel can cheat

without detection, the greater the gains from doing so.

Since , monitoring is difficult, the higher the probability that some part to the agreement will cheat and the more unsustainable the cartel will be.

Factors that affects the firms' ability to monitor a cartel:-

Number of firms in the industry. Characteristics of the products sold by

the firms. Production costs of each member. Behaviour of demand.

MONITORING A CARTEL

Efforts to curb Cartel

United States - The Sherman Anti-Trust Act (1890) i) This includes cartel violations, such as price fixing,

bid rigging and customer allocation ii) Sherman Act violations involving agreements

between competitors are usually punishable as criminal felonies.

European Union - EU’s Competition Law (Art. 81,Treaty of Rome)

Article 81 explicitly forbids price fixing and limitation/control of production.

CARTELS THAT HAVE BEEN BUSTED !

Nippon Carbon Co. ltd – International conspiracy to fix the price of graphite electrodes,2005. ($1,00,000)

The Morgan Crucible Co. - Price fixing of carbon brushes and current collectors, 2004. ($5,50,000)

Freyssinet Limitee – International bid-rigging scheme relating to The Hibernia Project , 2001. ($8,00,000)

Mitsubishi Paper Mills ltd. – Fixing prices in the thermal facsimile paper and refusing to supply the same to a Vancuver distributer, 1997. ($ 8,50,000)

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