A cartel is the association between companies in the same industry with the aim of dominating the market, disciplining competition and maximizing their profits.
The parties agree to standardize a price, ensuring a high value for their products or services.
The formation of a cartel is illegal, as it harms the economy and consumers' access to free competition.
The formation of the cartel and its impact on the economy
The formation of a cartel, also known as cartelization, happens when two or more companies in the same industry act together, combining the price of their products, the offer and, in some cases, the regional distribution.
This association between companies, whether explicit or implicit, aims to maximize profits and establish market share agreements. Thus, merchants control their industry and strategically avoid major competition.
It is important to remember that price matching is not about having the same price. The objective of forming a cartel is to maintain a flat price, with small margins set for more or less. This amount will always be agreed so that it is profitable for the merchants involved.
However, this whole scheme between companies directly affects the consumer and the economy. In the formation of a cartel, the consumer is the loser, because when there is competition between companies, prices become affordable for those who consume the products, an act that is prevented in a cartelization.
Furthermore, the formation of a cartel is harmful to the economy because it prevents the entry of new companies competing in the field, reducing the law of supply and demand.
Examples of cartels
There are several examples of cartels, even in our daily lives. One of the best known are the gas station, which within a given region control the price of their product so that there is no great competition and, consequently, loss of profitability in fuel sales.
Another common example is the public transport. Even though they are managed by private companies, in most cases, the ticket price is fixed and agreed between all the entities involved.
already the OPEC (Organization of Petroleum Exporting Countries) is considered by economists as one of the largest cartels in the world, because it manages to monopolize the production and distribution of oil in the world chain, preventing any free competition.
What does Brazilian law say about the cartel?
In Brazil, there is a law and a penalty for the formation of a cartel. The current law 8137 of 1990 considers as a “crime against the economic order” the agreement between companies. This legislation is intended to end market control, which limits competition.
The penalty for companies that form the cartel is 2 to 5 years in prison, in addition to a fine.
The cartel also has an administrative prohibition, which is in Law 12,529 of 2011. All acts that imply the formation of a cartel are administered by the WHERE, Administrative Council for Economic Defense.
Under CADE, the penalty is calculated on the billing of companies involved in a cartel and there is also a financial penalty for the executives of these companies and other individuals who carry out the actions of a cartelization.
See also the meaning of:
- trust;
- oligopoly;
- Holding;
- collusion.