Cartel Definition, Characteristics, Objectives, Types, Impacts and Examples

Education. Co. ID – This opportunity we will discuss about the cartel, as for the explanation of this cartel will be described in full below:

Cartel Definition

The definition of a cartel is a cooperation or also a merger based on volunteering and several similar business entities to be able to produce or sell their products. Both legally and economically, each of the merged business entities is still standing and also has the freedom to act except as agreed in the agreement.

This definition of a cartel is a group of independent producers whose objectives are to set prices, to limit supply and competition. Under antitrust laws, these cartels are banned in almost all countries. Even so, this cartel still exists both nationally and internationally, formally or informally. Based on this definition, a single business entity holding a monopoly cannot/can be considered as a cartel, although it can/could also be considered guilty if it abuses its monopoly owned. Usually these cartels arise in oligopoly conditions, where there are a small number of sellers with homogeneous types of products.

This cartel is carried out by business actors in order to gain market power. Market power allows them to be able to regulate product prices by limiting the availability of goods in the market. this inventory arrangement is carried out by jointly limiting production and/or dividing sales areas.

Cartel Characteristics

In the Big Indonesian Dictionary (KBBI), this cartel has 2 unified characteristics, including the following:

1. Organization of a company with other companies, in producing similar goods.
2. An agreement made by a group of companies, which aims to control the prices of certain commodities.

Cartel's Purpose

The objectives of this cartel include the following:

1. To be able to reduce or also to eliminate competition
2. To be able to create a uniform price, the amount of production and also the distribution of marketing areas for each business entity.
3. All of these objectives are achieved by entering into an agreement or agreement between a business entity or several producing companies and others of the same type to regulate and also control various things such as prices, marketing areas and so on with the aim of suppressing competition and also getting profit.

Types of Cartel

Below are several types of cartels, including the following:

Price Cartel

In this type of price cartel, a minimum price is agreed upon for an item that can be sold. Members of this cartel are prohibited from selling goods below the agreed minimum price.

Terms Cartel

In this type of cartel, uniform conditions are agreed upon in terms of delivery, payment and packaging of goods.

Rayon Cartel

In this type of rayon cartel, it is agreed that the sales area of ​​each cartel is agreed, the purpose of implementing this marketing area is to prevent competition between rayon members.

Production Cartel

In this type of production cartel, it is agreed that the maximum number of goods that each member of the cartel can produce is agreed upon. The purpose of this production limitation is so that there is no excess production which results in a decrease in the price of an item.

Sales Syndicate

In this sales syndicate cartel, it is agreed that each member of the cartel must submit the goods they produce for sale at only one price.

Pool Cartel

In this type of cartel pool, the profits earned by the cartel members are collected in shared cash and then divided according to the agreed agreement. This type of cartel is also often referred to as a profit-sharing cartel.

Cartel Advantages and Disadvantages

Cartel Profits

The Cartel Advantages include the following:

1. The monopoly position of the cartel in the market causes the cartel to have a good position in facing competition.
2. The risk of selling the goods produced as well as the risk of the capital of its members can be minimized because both production and sales can be arranged and guaranteed the amount.
3. This cartel can carry out rationalization, so that the prices of goods sold by this cartel tend to fall.

Cartel Losses

The Cartel Losses, including:

• In any case, these cartel competitors could sneak into cartel members.
• In the life of the wider community, this cartel is considered as something that is detrimental to the community, because this cartel can practically increase prices more freely.
• Regulations made jointly among members with internal sanctions of this cartel will bind the freedom of members who are members of the cartel.

Cartel Impact

Below is the impact of the cartel on trade, including the following:

Positive Impact of the Cartel

The positive impacts of cartels include:

1. This cartel allows the working relationship between company management and workers to be more conducive, due to all demands that are a source of conflict such as wage increases and worker welfare can/can be easier granted.
2. The risk of termination of employment can also be minimized or even avoided, due to the company those who are members of the ubu cartel tend to have a more stable position in the competition free.
3. The risk of loss due to low levels of sales can also be minimized, because both production and sales are regulated and the amount is guaranteed.

Negative Impact of Cartel

The negative impacts of cartels include:

1. The lack of innovation development is caused because the profits obtained by the company tend to be stable and certain.
2. The company also does not have the freedom to develop innovation and business expansion because of the regulations that have been agreed in the cartel and the sanctions.
3. It is detrimental to the consumer community, because the market power of this cartel has resulted in prices are unstable and the cartel has the power to increase the price of the product accordingly his wish.
4. The business climate has also become less conducive due to the absence of healthy competition among producers.
5. Affecting people's purchasing power, because product prices are vulnerable and unstable.
6. The profits obtained and also enjoyed by the producers of the cartel members may be too large and long term.
7. The price of products controlled by the cartel can also trigger inflation which is detrimental to the public at a macro level.

Cartel Example

Below are some examples of companies that carry out cartels, including the following:

• In Indonesia, this cooperation in the form of a cartel occurs at PT Holcim Indonesia, PT Semen Gresik, and PT Indocement which controls 88% of the market share and is also able to control the price of cement in Indonesia country.
• In Germany there are six largest cement producers who cooperate in the form of cartels such as Dyckerhoff, Heidelberg Cement AG, Alsen AG (Holcim Deutschland AG), Readymix AG (Cemex Deutschland AG), Lafarge Zement GmbH, and Schwenk Zement KG.
• In the UK, there are four major cement companies with the most reported cartels, including Castle (Heidelberg), Buxton Lime Industries, Cemex UK and Lafarge.
• In this European Union region, cement companies are known to carry out cartels including the following Dyckerhoff AG, Holcim, Heidelberg, Lafarge and Cemex spread across Germany, France, Belgium, England, the Netherlands and Luxembourg.

That's all and thank you for reading about the Definition of a Cartel, Characteristics, Objectives, Types, Impacts and Examples, I hope what is described can be useful for you.