A cartel is an association of entrepreneurs on the basis of an agreement, which specifies the conditions binding on all participants regarding the volume of production, prices, and sales policy. At the same time, the cartel members have legal and economic independence and act only within the framework of the established agreement.
Instructions
Step 1
As a rule, enterprises of the same industry are united in cartels. They conclude an agreement concerning the economic aspects of the activity: the sales market, the price level, the volume of production, the assortment of goods, the hiring of labor, etc.
Step 2
In a cartel, there is usually no clearly defined head link, the enterprises that make up the cartel retain their independence, and the agreement between the participants is concluded as a result of meetings and negotiations of the management of production organizations.
Step 3
The cartel as a type of business association has some specific features:
- the association is based on a contract, i.e. collusion of a group of producers in order to exclude competition between them and obtain monopoly profits;
- Cartel members retain ownership of their organizations, ensuring their financial, economic and legal independence;
- the cartel usually includes enterprises of the same industry;
- enterprises - members of the cartel sell products jointly, and often - and produce it;
- the cartel has a system of coercion and restrictions, and the violators are subject to the sanctions established by the agreement.
Step 4
Since many countries currently have monopoly legislation, cartel associations are prohibited. The exception is agricultural cartels, as well as those associations that meet the conditions below. So, the ban on cartel formation is lifted if:
- the cartel has a small market share;
- the activities of the cartel are based on the development of a new market;
- cartels bring economic benefits to the entire country.
Step 5
The most efficient in their activities are cartels, which not only set uniform prices and carry out joint sales, but restrict production by setting quotas on the volume of output and thereby regulate production capacity.