The Pros And Cons Of Cartel

Monopolies and oligopolies often use anti-competitive practices, which can have a negative impact on the economy. This is why company mergers are often examined closely by government regulators to avoid reducing competition in an industry.

There are different types of businesses, for example, some use monopolies, trust and pools, while other eliminate competition for higher prices. As stated in “Progressive reformers regarded regulation as a cure for all sorts of socioeconomic and political problems” , “The Sherman Act of 1890 attempted to outlaw the restriction of competition by large companies that co-operated with rivals to fix outputs, prices, and market shares, initially through pools and later through trusts” , meaning, competition is the

In Document 4 “A Call to Action,” by James B. Weaver, it explained to the public through the author's thoughts of that monopolies had too much power and that the monopolies destroy competition and trade. This book was written at the time of when big corporations were taking over and destroying competition. Also, the author goes into detail that they control the price of the raw material, so they can produce their products at a low price and sell it at a low price. By selling that the lowest price, the competitors can not compete are driven out of business or reduce the wages of the workers. This idea can be related to current times were big corporations, such as Walmart, are destroying competition because they lower their prices that the competitors cannot compete with.

Monopolies are quite dangerous economically, and are usually broken up by the federal government, with only two exceptions- electricity, and gas. These are modern examples. A monopoly is the economic term for when a company that makes a product has no competition, and can raise the prices as high as they want. For example, the most obvious and powerful monopoly of the industrial revolution was the railroad monopoly. They made money quite quickly as a shipping company, and destroyed any and all competition as the only transcontinental railroad at the time. It’s leader, Cornelius Vanderbilt came to be considered one of the most powerful people of all time, due to his control over who he shipped for.

Many utilities are monopolies by having the entire market share in certain areas. With deregulation of these utilities, the market becomes open to competition for market share to begin. In terms of regulation of monopoly, the government attempts to prevent operations that are against the public interest, call anti-competitive practices. Likewise, oligopoly is a market condition where there are minimal distributors that have a major influence on prices and other market factors. This causes market failure, especially if evidence of collusive behavior by dominant businesses is found.

The economics of supply and demand suggest that output restriction will increase demand which in turn will increase prices. Consequently, output restriction can affect prices in much the same way as price fixing. Those four forms of cartel conduct exist when the individuals or businesses agree to act together for competition fairly and maintain profits. Moreover, there are other anti-competitive practices such as boycotts and misuse of market power. A boycott is an agreement between two or more parties not to deal with a third party, or to do so only upon certain terms. On the other hand, misuse of market power is the individuals or businesses who use their market power for the purpose of eliminating or substantially damaging a competitor or make barriers to enter into the market. The ACCC educates consumers and businesses as to their right and responsibilities under the CCA.

The antitrust laws are the basis of this national policy. These laws, enforced by both the federal and state governments, require companies to compete in the marketplace. The Sherman Act, the first federal "antitrust law," was enacted in 1890, at a time when there was enormous concern about "trusts" -- combinations of companies that were able to control entire industries. Since then, other laws have been enacted to supplement the Sherman Act, including the Federal Trade Commission Act and the Clayton Act (1914). With some revisions, these laws still are in effect today. They have the same basic objective: making sure there are strong economic incentives for businesses to operate efficiently, keep prices down, and keep quality up.

A monopoly is distinguished from a monopsony, in which there is only one buyer of a product or service; a monopoly may also have monopsony control of a sector of a market. Likewise, a monopoly should be distinguished from a cartel (a form of oligopoly), in which several providers act together to coordinate services, prices or sale of goods. Monopolies, monopsonies and oligopolies are all situations such that one or a few of the entities have market power and therefore interact with their customers (monopoly), suppliers (monopsony) and

One law, which helps protect businesses and promotes fair competition for the benefit of the consumers, is the US Anti-Trust law. This law is comprised of three different acts: The Sherman Act 1890, the Clayton Act 1914 and the Federal Trade Commission Act 1914. The first role these acts perform is to restrict the formation of cartels which would perform outside of the guidelines of the government and there for not be bound by there laws. The second role these acts perform is to ensure no single business entity can perform a certain level of mergers and acquisitions, which would essentially turn them into a monopoly and reduce competition. Overall, the antitrust laws are constantly debated for their overall functionality and efficiency in protecting the fair business practices of the United States. [2] “One view, mostly closely associated with the "Chicago School of economics" suggests that antitrust laws should focus solely on the benefits to consumers and overall efficiency, while a broad range of

Many companies and people have committed monopolies before they were illegal and even after it. A monopoly is when one person has complete control over a company and makes close to 100% of the profits but because of the The Sherman Antitrust Act passed on April 8, 1890, “combination in the form of trust and otherwise, conspiracy in restraint of trade.” In simple terms the act prohibited any forms of monopoly in business and marketing fields. Monopolies committed before the Act, making it legal in every way but unethical, by some of the famously known marketers like John D. Rockefeller making him filthy rich. While others committed after The Sherman Antitrust Act caused a company like Microsoft to be sued and have a bruised ego.

Section 1 of the Sherman Antitrust Act, in part, states that “every contract, combination… or conspiracy, in the restraint of trade or commerce… is declared to be illegal.” (Sherman Act, 2006). This law provides “a comprehensive charter of economic liberty aimed at preserving free and unfettered competition as the rule of trade (Northern Pacific Railway Company vs. United States, 1958; Reiter vs. Sonotone Corporation, 1979). It relies on a fundamental belief in supply and demand (Baum Research & Development Company vs. Hillerich & Bradsby, 1998).

When only a few sellers offer a product with little regard to competition it is called an oligopoly. It is different from a monopoly because multiple corporations are involved, but the effects on the consumer are the same - bad. Although competition is usually in the best interest of the consumer, it is not always in the best interest of the corporation. If we examine the two leading soft drink producers, Coca-cola and Pepsi-cola, we see a prime example of an oligopoly (Zachary, 1999). As things are presently, each of these soft drink companies has about half of the soft drink market, and examined from a world-wide perspective that is a pretty large market. Either one of them, Coke or Pespi, could conceivably lower their prices in

One of the biggest cases registered by European Commission was an investigation of vitamins cartels. A cartel is a group of similar, independent companies, which join together to fix prices, to limit production or to share markets or customers between them .

An oligopoly, is when there are only a few number of companies that control a specific market. The barriers to entry can be both legal/political (ie. number of licenses awarded to cell phone operators) to the fact that the companies themselves create a "cartel like" attitude effectively brushing of the market new entrants through aggressive measures like undercutting pricing on new smaller entrants, controlling inputs for production, etc.

Cartels have always been a potential threat to the economy and now the European Commission (EC) has fined 17 companies in the bathroom market a total of €622,250,783 for being part of a price fixing cartel. One of these companies, Masco, was the first to provide the EC with information about the cartel and it has received full immunity from fines due to the EC’s Leniency Programme (European Commission, 2010). According to Commission Vice President and Competition Commissioner Joaquín Almunia (2010) these 17 companies fixed the prices of baths, sinks, taps, etc. for 12 years in six countries, affecting 240 million people. Furthermore, Almunia (2010) claims that a number of people have been harmed by this cartel, among them businesses