√ Definition of Cartel, Purpose, Characteristics, Types, Impacts and Examples
Definition of Cartel, Purpose, Characteristics, Types, Impacts and Examples - On this occasion About Knowledge will discuss about the Cartel. Which in this discussion explains the meaning of a cartel, its characteristics, objectives, types, impacts and examples in a brief and clear manner. For more details, see the following article.
Definition of Cartel, Purpose, Characteristics, Types, Impacts and Examples
A cartel is a group of independent producers whose goals are to set prices, to limit supply and to limit competition. Under antitrust laws, cartels are banned in most countries. Even so, cartels still exist both in the national and international spheres, both formal and informal.
That single business entity holding a monopoly cannot be considered a cartel. Although they can also be considered guilty if they abuse the monopoly they have. Usually cartels arise in conditions of oligopoly, where there are a small number of sellers with a homogeneous product type.
Definition of Cartel
The definition of a cartel is a cooperation or also a merger based on voluntary action and several similar business entities to be able to produce or sell the goods they produce. Both legally and economically, each of the merged business entities is still standing. As well as having the freedom to act except as agreed in the agreement.
Cartels are carried out by business actors in order to gain market power. This market power allows them to be able to regulate product prices by limiting the availability of goods in the market. Inventory arrangements are carried out jointly in limiting production or dividing sales areas.
Cartel Characteristics
In the Big Indonesian Dictionary (KBBI), Cartel has 2 (two) unified characteristics, namely:
- Organization of a company with other companies, in producing similar goods.
- Agreement made by a group of companies, which aims to be able to control the price of certain commodities.
Cartel Goals
The objectives of the cartel are among others:
- In order to reduce or to eliminate competition.
- In order to create uniformity in price, amount of production and division of marketing areas for each business entity.
All of these objectives are achieved by entering into agreements or agreements between business entities and several producing companies. As well as the like to organize and control things. For example, prices, marketing areas and so on with the aim of suppressing competition and making a profit.
Types of Cartel
The following are several types of cartels, including:
Price Cartel
In this type of price cartel, a minimum price is agreed on for an item that may be sold. Cartel members are prohibited from selling goods below the agreed minimum price.
Terms Cartel
In this type of cartel terms, uniform terms are agreed upon in terms of delivery, payment and packaging of goods.
Rayon Cartel
In the type of rayon cartel, it is agreed upon the sales areas of each cartel, the purpose of implementing marketing areas is to prevent competition between members of the rayon.
Production Cartel
In this type of production cartel, it is agreed upon the maximum amount of goods that each member of the cartel can produce. The purpose of limiting production is to avoid overproduction which results in a decrease in the price of an item.
Sales Syndicate
In a sales syndicate cartel, it is agreed that each member of the cartel must hand over the goods they produce to be sold at only one price.
Cartel Pool
In this type of cartel pool, the profits earned by the cartel members are collected in the joint treasury and then divided according to the agreed agreement. This type of cartel is often referred to as a profit-sharing cartel.
Cartel Advantages and Disadvantages
Below are some of the advantages and disadvantages of cartels, namely:
Cartel Profits
- The monopoly position of the cartel in the market causes the cartel to have a good position in facing competition.
- The risk of selling the goods produced and the risk of the capital of its members can be minimized. This is because both production and sales can be regulated and the amount guaranteed.
- This cartel can carry out rationalization, so that the prices of goods sold produced by this cartel tend to fall.
Cartel Losses
- In various possibilities, the cartel's competitors can sneak into cartel members.
- In public life, this cartel is considered as something that is detrimental to society. Because this cartel can practically increase prices more freely.
- Rules made jointly among members with internal cartel sanctions will bind the freedom of members who are members of the cartel.
Cartel Impact
Below is the impact of the cartel on trade, including:
Positive Impact of Cartels
- With a cartel, the working relationship between company management and workers is more conducive. This is because all demands that are a source of conflict such as wage increases and workers' welfare can be more easily granted.
- The risk of termination of employment can be minimized or even avoided. This is because companies that are members of a cartel tend to have a more stable position in free competition.
- The risk of loss due to low sales levels can be minimized. This is because both production and sales are regulated and the amount is guaranteed.
Negative Impact of Cartels
- The lack of innovation development is due to the fact that the profits earned by the company tend to be stable and certain.
- Companies do not have the freedom to develop innovation and business expansion because there are rules that have been agreed upon in the cartel and the sanctions.
- Detriment to the consumer community, due to the market power possessed by this cartel resulting in unstable prices. And the cartel has the power to be able to increase the price of the product as it wishes.
- The business climate becomes less conducive due to the absence of healthy competition among producers.
- Affecting people's purchasing power, this is because product prices are vulnerable and unstable.
- It is possible that the profits obtained and enjoyed by the cartel member producers are too large and long term.
- Cartel-controlled product prices can also trigger inflation that is detrimental to society at a macro level.
Cartel example
Below are some examples of companies that carry out cartels, including:
- In Indonesia, cooperation in the form of a cartel has occurred with PT Holcim Indonesia, PT Semen Gresik, as well PT Indocement which controls 88% of the market share and is also able to control the price of domestic cement country.
- In Germany there are six of the largest cement producers who cooperate in the form of a cartel such as Dyckerhoff, Heidelberg Cement AG, Alsen AG (Holcim Deutschland AG), Readymix AG (Cemex Deutschland AG), Lafarge Zement GmbH, Serta Schwenk Zement KG.
- In the UK there are four main cement companies that are most often reported to be cartelling, including Castle (Heidelberg), Buxton Lime Industries, Cemex UK and Lafarge.
- Within the European Union, there are known cement companies that have committed cartels, including the following: Dyckerhoff AG, Holcim, Heidelberg, Lafarge and Cemex which are spread across Germany, France, Belgium, England, Netherlands and Luxembourg.
Thus the explanation about Definition of Cartel, Purpose, Characteristics, Types, Impacts and Examples. Hopefully it can be useful and add to your insight. Thank You.
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