A cartel or – in other Western languages: cartello, Kartell, Kartelis – is a group of independent market participants, whose goal is to improve their profits and/or market position by of reducing their mutual competition. These cartels of the economic sphere are usually associations of entrepreneurs of the same trade, and thus alliances of rivals. Exceptionally also states pursuing their economic interests may form cartels, e.g. the OPEC. Cartels are analysed by cartel theory. “Cartels” are to be distinguished from other forms of collusion or anti-competitive organization, such as corporate mergers.

Cartel historyEdit

Already for antiquity, cartels can be detected,[citation needed] [1] which is true for phases of functioning markets. In the European middle ages, there were the guilds being associations of craftsmen or merchants of the same trade. They often have been regarded by scholars as cartel-like.[2] In the mining industry of the late middle ages, there already had been tightly organized sales cartels, so the salt-syndicate of the kingdoms of France and Naples of 1301, or the Alaun cartel of 1470 between the Papal State and the Kingdom of Naples.[3] Both unions had a common sales organization for their overall production, the Societas Communis Vendicionis.

In Europe and North America of the 18th and 19th century, the economic conditions were mainly liberal. But since around 1870, in more and more industries with formerly free markets cartels appeared.[4] Although cartels were to be found in all economically developped countries, there was a core area of cartel building activities in central Europe. The German Empire and Austria-Hungary were named as the “lands of the cartels”.[5] Also the US passed a phase of intense cartelization: It was the times of the robber barons, which first led to pools, then to industrial trusts that were already closer than a cartel.[6]

After First World War, the cartelization increased worldwide. Cartels became the leading form of market organization, particularly in Europe and Japan. In the 1930s, authoritarian regimes, such as Nazi Germany, Italy under Mussolini and Spain of dictator Franco used the cartel form to organize their capitalist planning economies. The United States between the late 19th century to around 1945 showed a deep ambivalence to economic combinations (cartels or trusts). Phases of opposition to market concentration were followed by relatively tolerant terms. During Second World War, the US strictly turned away from the cartel system.[7] After 1945, Washington promoted market liberalism and, according to this, a world-wide cartel ban. Thus, cartels have been curbed in more and more countries.

Cartel typesEdit

Cartels have been manifold in structure and function. Thus, typologies have emerged to distinguish distinct forms of cartels:[8]

  • Selling versus buying cartels, which unite against their customers or their suppliers. The former type has been much more frequent than the latter.
  • Domestic versus international cartels having only national members or such from more than one country.[9] Full fledged international cartels comprised the whole world, such as the international steel cartel of the interwar period.
  • Price cartels try to achieve a common price fixing, normally to raise prices for the respective commodity above the competitive price level. The loosest form of a price cartel can be recognized in tacit collusion, wherein the smaller enterprises follow the actions of the market leader.
  • Quota cartels distribute proportional shares of the market to its members.
  • Common sales cartels sell their joint output via a central selling agency (in French: comptoir). This type of cartels has been called "syndicate" or in French "syndicat industriel".
  • Territorial cartels distribute certain districts of the market to the sole disposal of individual participants, who now can act as monopolists.
  • Submission cartels are made up to control the offers given to public tenders. The approach of this type of cartel is bid rigging: bidders for a tender agree on a bid price, agree not to bid, or agree to share the objects of the winning bid among themselves [10].
  • Technology or patent cartels try to monopolize the use of technical and scientific know-how.
  • Condition cartels unify the contractual terms, e.g. the modes of payment and delivery or the limits of warranty.
  • Standardization cartels implement common norms for the sold or purchased products, such as cement, butter, paper. If a cartel produces different sorts or grades of a good, conversion factors were applied to calculate the value of the respective output.
  • Compulsory cartels (or "forced cartels") versus voluntary cartels. The latter were formed by the free will of its participants, while the former were established or maintained by external pressure.

Cartel propensityEdit

Mankind is a cooperative species. Therefore, also competitors, such as entrepreneurs of the same industry have the tendency to collude.

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.

Cartel effectsEdit

A survey of hundreds of published economic studies and legal decisions of antitrust authorities found that the median price increase achieved by cartels in the last 200 years is about 23 percent.[11] Private international cartels (those with participants from two or more nations) had an average price increase of 28 percent, whereas domestic cartels averaged 18 percent. Less than 10 percent of all cartels in the sample failed to raise market prices.

In general, cartel agreements are economically unstable in that there is an incentive for members to cheat by selling at below the agreed price or selling more than the production quotas set by the cartel (see also game theory). This has caused many cartels that attempt to set product prices to be unsuccessful in the long term. Empirical studies of 20th-century cartels have determined that the mean duration of discovered cartels is from 5 to 8 years[12]. However, once a cartel is broken, the incentives to form the cartel return and the cartel may be re-formed. Publicly known cartels that do not follow this cycle include, by some accounts, the Organization of the Petroleum Exporting Countries (OPEC).

Price fixing is often practiced internationally. When the agreement to control price is sanctioned by a multilateral treaty or protected by national sovereignty, no antitrust actions may be initiated[13]. Examples of such price fixing include oil, whose price is partly controlled by the supply by OPEC countries, and international airline tickets, which have prices fixed by agreement with the IATA, a practice for which there is a specific exception in antitrust law.

Cartel theory versus antitrust conceptEdit

The scientific analysis of cartels is based on cartel theory. This approach was established in 1883 by the Austrian Friedrich Kleinwächter and was set forth by mainly German-speaking scholars.[14] This direction more or less tended to regard cartels as an acceptable means of the economic process. At the same time, e.g. through the Sherman act of 1890, an opposing approach developed in the United States, when American lawyers more and more turned against trade restrictions and thus against almost all cartels. The showdown between the European pro-cartel approach and the American anti-cartel movement occurred during WW II, when activists like Thurman Arnold and Harley M. Kilgore could turn their agenda into governmental policy in Washington.

Legislation on cartelsEdit

Because cartels are likely to have impact on market positions, they are subjected to criteria of competition law executed by governmental authorities featuring competition regulators. The same criteria of good competition are applied to corporate mergers.

Prior to World War II (except in the United States), members of cartels could sign contracts that were enforceable in courts of law. There were even instances where cartels are encouraged by states. For example, during the period before 1945, cartels were tolerated in Europe and were promoted as a business practice in German-speaking countries.[15] This was the norm due to the accepted benefits, which even the U.S. Supreme court has noted. In the case, the U.S. v. National Lead Co. et al., it cited the testimony of individuals, who cited that a cartel, in its protean form, is "a combination of producers for the purpose of regulating production and, frequently, prices, and an association by agreement of companies or sections of companies having common interests so as to prevent extreme or unfair competition."[16]

Today, however, price fixing by private entities is illegal under the antitrust laws of more than 140 countries. Examples of prosecuted international cartels are lysine, citric acid, graphite electrodes, and bulk vitamins.[17] This is highlighted in countries with market economies wherein price-fixing and the concept of cartels are considered inimical to free and fair competition, which is considered the backbone of political democracy.[18] The current condition makes it increasingly difficult for cartels to maintain sustainable operations. Even if international cartels might be out of reach for the regulatory authorities, they will still have to contend with the fact that their activities in domestic markets will be affected.[19]

Cartels typically control selling prices by limiting supply, or other restrictive practices. Less frequent, cartels are organized to force down the prices of purchased inputs. Antitrust laws attempt to deter or forbid cartels. A single entity that holds a monopoly by this definition cannot be a cartel, though it may be guilty of abusing said monopoly in other ways.

Export cartels: Unlike other cartels, export cartels are legal in virtually all jurisdictions, despite their harmful effects on affected markets.[20]

Errors about cartelsEdit

Liberal economic science and the post-1945 antitrust movement have fostered prejudices against cartels. Thus, a number of popular opinions about cartels turn out to be false, because their underlying conclusions had been made without a broad empirical investigation. scrutiny. Such errors occur by simplification of the object ‘cartel’, which changes from one ethnical and historical background to the other:

  • Cartels result from oligopoly? – Allegedly, cartels are unlikely to appear in polypolistic markets, because they usually need an oligopolistic market structure—industries with a small number of sellers. This is only true as an overall tendency, which had been overcome often by organizational expertise and political pressure. From Germany of the late 19th and early 20th century, cartels are known with around 100 participants. When the government helped, in the extreme thousands of enterprises could be members of a cartel.[21]
  • Cartel – a legal term? – Sometimes, “cartel” is misunderstood as a legal term. However, there is no legal form that is specific for a cartel. And cartels were historically older than the legal terms that were made up to control them. Therefore, cartel law is secondary to the socio-economic phenomenon “cartel”. US antitrust law did not use this term, but ‘trade restrictions’, whereby cartels and other entities can be prosecuted and banned.
  • Cartels always disliked? – Allegedly, cartels have always been criminal and hated. This is untrue particularly for the inter-war period.[22]. In the 1920s, international cartels were welcomed as remedies of international tensions and, in the 1930, many governments strived to reorganize their problem industries by cartels. Some authoritarian regimes, such as the Third Reich, Italy under Mussolini and Spain under Franco endeavored to elaborate a total cartel system comprising all trades of the economy.
  • The US – always an example for free markets? – Allegedly, the Americans have always been an example of market liberalism and antitrust, which was directed against cartels. Actually, prior of 1945, the American treatment of the market concentration issue had a bad reputation among most European experts, because they regarded the American regulation not only as ineffective, but as counterproductive. During the first years of New Deal 1933-35, the American government even promoted a union-wide cartelization through the “codes of fair competition”.[23]


The printing equipment company ATF explicitly states in its 1923 manual that its goal is to 'discourage unhealthy competition' in the printing industry.

See alsoEdit


  • Connor, John M.: Private international cartels. Effectiveness, welfare, and anticartel enforcement. Purdue University. West Lafayette/Indiana 2003. Available under: https://www.researchgate.net/profile/John_Connor7/publication/5218804_Private_International_Cartels_Effectiveness_Welfare_and_Anticartel_Enforcement/links/59e8f3faa6fdccfe7fa8efc6/Private-International-Cartels-Effectiveness-Welfare-and-Anticartel-Enforcement.pdf.
  • Fear, Jeffrey R.: Cartels. In: Geoffrey Jones; Jonathan Zeitlin (ed.): The Oxford handbook of business history. Oxford: Univ. Press, 2007, p. 268-293.
  • Freyer, Tony A.: Antitrust and global capitalism 1930–2004, New York 2006.
  • Hexner, Ervin, The International Steel Cartel, Chapel Hill 1943.
  • Kleinwächter, Friedrich, Die Kartelle. Ein Beitrag zur Frage der Organisation der Volkswirtschaft, Innsbruck 1883.
  • Leonhardt, Holm Arno: Kartelltheorie und Internationale Beziehungen. Theoriegeschichtliche Studien, Hildesheim 2013.
  • Leonhardt, Holm Arno: Regionalwirtschaftliche Organisationskunst. Vorschlag zur Ergänzung des NRW-Antrags zum UNESCO-Welterbe. In: Forum Geschichtskultur Ruhr 2013, issue 2, p. 41-42.
  • Leonhardt, Holm Arno: The development of cartel+ theory between 1883 and the 1930s – from international diversity to convergence: syndicats industriels, ententes, comptoirs, trusts, pools, combinations, associations, kartells, cartelle, Unternehmerverbände. Hildesheim 2018. https://www.uni-hildesheim.de/ojs/index.php/HiBTG/article/view/77.
  • Levenstein, Margaret C. and Valerie Y. Suslow. "What Determines Cartel Success?" Journal of Economic Literature 64 (March 2006): 43–95.
  • Liefmann, Robert: Cartels, Concerns and Trusts, Ontario 2001 [London 1932]
  • Martyniszyn, Marek, "Export Cartels: Is it Legal to Target Your Neighbour? Analysis in Light of Recent Case Law", Journal of International Economic Law 15 (1) (2012): 181–222.
  • George J. Stigler: The extent and bases of monopoly. In: The American economic review, Vol. 32 (1942), pp. 1–22.
  • Stocking, George W. and Myron W. Watkins: Cartels in Action. New York: Twentieth Century Fund (1946).
  • Stocking, George W. and Myron W. Watkins: Cartels or competition? The economics of international controls by business and government. New York: Twentieth Century Fund 1948.*
  • Strieder, Jakob: Studien zur Geschichte kapitalistischer Organisationsformen. Monopole, Kartelle und Aktiengesellschaften im Mittelalter und zu Beginn der Neuzeit. München 1925.
  • Wells, Wyatt C.: Antitrust and the Formation of the Postwar World, New York 2002.


  1. ^
  2. ^ Holm A. Leonhardt: Kartelltheorie und Internationale Beziehungen. Theoriegeschichtliche Studien, Hildesheim 2013, p. 79.
  3. ^ Nino Herlitzka: Bemerkungen zur historischen Entwicklung von Kartellen. In: Ludwig Kastl (Ed.): Kartelle in der Wirklichkeit. Köln 1963, p. 124–127.
  4. ^ Holm A. Leonhardt: Kartelltheorie und Internationale Beziehungen. Theoriegeschichtliche Studien, Hildesheim 2013, S. 80–87.
  5. ^ Holm A. Leonhardt: Kartelltheorie und Internationale Beziehungen. Theoriegeschichtliche Studien, Hildesheim 2013, S. 83–84.
  6. ^ Holm Arno Leonhardt: The development of cartel+ theory between 1883 and the 1930s. Hildesheim 2018. p. 18.
  7. ^ Holm A. Leonhardt: Kartelltheorie und Internationale Beziehungen. Theoriegeschichtliche Studien. Hildesheim 2013, p. 251–292.
  8. ^ Jeffrey R. Fear: Cartels. In: Geoffrey Jones; Jonathan Zeitlin (ed.): The Oxford handbook of business history. Oxford: Univ. Press, 2007, p. 269-274; Robert Liefmann: Cartels, Concerns and Trusts, Ontario 2001 [London 1932], p. 63-71.
  9. ^ Fellman, Susanna; Shanahan, Martin (2015). Regulating Competition: Cartel registers in the twentieth-century world. London: Routledge. p. 224. ISBN 9781138021648.
  10. ^ John M. Connor and Dan Werner. Variation in Bid-Rigging Cartels’ Overcharges: SSRN Working Paper No. 3273988. (October 27, 2018). [1]
  11. ^ John M. Connor. Cartel Overcharges, pp. 249-387 of The Law and Economics of Class Actions, in Vol. 29 of Research in Law and Economics, edited by James Langenfeld (March 2014). Bingley, UK: Emerald House Publishing Ltd. June 2017
  12. ^ Levenstein, Margaret C. and Valerie Y. Suslow. "What Determines Cartel Success?" Journal of Economic Literature 64 (March 2006): 43–95
  13. ^ Connor, John M. Private International Cartels: A Concise Introduction: SSRN Working Paper. (November 12, 2014). [2]
  14. ^ Holm Arno Leonhardt: The development of cartel+ theory between 1883 and the 1930s. Hildesheim 2018.
  15. ^ Cini, Michelle; McGowan, Lee (2009). Competition Policy in the European Union. New York: Palgrave Macmillan. p. 63. ISBN 0-230-00675-2.
  16. ^ Lee, John (2016). Strategies to Achieve a Binding International Agreement on Regulating Cartels: Overcoming Doha Standstill. Berlin: Springer. p. 13. ISBN 978-981-10-2755-0.
  17. ^ Connor, John M. (2008): Global Price Fixing: 2nd Paperback Edition. Heidelberg: Springer.
  18. ^ Sagafi-Nejad, Tagi; Moxon, Richard; Perlmutter, Howard (2017). Controlling International Technology Transfer: Issues, Perspectives, and Policy Implications. New York: Pergamon Press. p. 180. ISBN 0-08-027180-4.
  19. ^ Fellman & Shanahan, p. 224.
  20. ^ Martyniszyn, Marek (2012). "Export Cartels: Is it Legal to Target your Neighbour? Analysis in Light of Recent Case Law". Journal of International Economic Law. 15 (1): 181. doi:10.1093/jiel/jgs003.
  21. ^ Examples for this are the Rhenish-Westphalian Coal Cartel with 97 member companies in 1907 (Eva-Maria Roelevink: Organisierte Intransparenz. Das Kohlensyndikat und der niederländische Markt 1915-1932. München 2015, p. 56) or the NIRA cartels of the US from 1933 to 1935, when most firms of many industries adjusted prices and quantities (Ellis W. Hawley: The new deal and the problem of monopoly. A study in economic ambivalence. 2. ed. New York 1996, p. 57-66).
  22. ^ Jeffrey R. Fear: Cartels. In: Geoffrey Jones; Jonathan Zeitlin (ed.): The Oxford handbook of business history. Oxford: Univ. Press, 2007, p. 268.
  23. ^ Ellis W. Hawley: The new deal and the problem of monopoly. A study in economic ambivalence. 2. ed. New York 1996, p. 57-66.
  24. ^ Martyniszyn, Marek (2017). "Foreign State's Entanglement in Anticompetitive Conduct". World Competition. 40 (2): 299.
  25. ^ Holm Arno Leonhardt: Regionalwirtschaftliche Organisationskunst. Vorschlag zur Ergänzung des NRW-Antrags zum UNESCO-Welterbe. In: Forum Geschichtskultur Ruhr 2013, issue 2, p. 41-42.

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