1. Introduction
Cartel is an association of manufacturers or suppliers with the purpose of maintaining prices at a high level and restricting competition. It means that undertakings are coming together and want to maximize their profits by market sharing, price fixing, supply restriction.
Every undertakings want to increase their profits but not all of them want to compete with each other. They try to avoid competition due to risks of competition. Because if competition exists, undertakings will take high risks because of nature of competition. One company will win but the other cannot earn profit. On the other hand, competition between undertakings beneficial for customers due to better product and low costs. Thus, undertakings try to act restriction of competition. Their tools are anti-competitive agreements, concerted practices and decisions. But in this article, we see how are the suitable market conditions for cartel and how to create anti-competitive agreements.
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2. How is The Suitable Market Conditions For Cartel?
Firstly, if some conditions exists, creating cartel will be easier for undertakings. These are barriers to market entry, predictable market conditions, monitoring, detection and retaliation mechanisms, symmetry between undertakings and products and communication. Please do not forget: All of them are illegal!
- Barriers to Market Entry: If small undertakings cannot entry these markets, we can say that this market probably has cartels due to controls of cartels.
- Predictable Market Conditions: Some markets don’t have big progress in terms of technological, in other word their market conditions are presumable and obvious.
- Monitoring, Detection and Retaliation Mechanism: In such markets has few undertakings and their moves are extremely visible and distinguishable, so they control each other every time and act by taking this action into account.
- Symmetry Between Undertakings and Products: In such market like that, undertakings or products very similar to each other.
- Communication: Some markets, like oligopolistic market, when one undertaking act, every undertakings can see that. Cartel’s main aim is increasing their profits but in this example, if one undertaking cheat the cartel, others can see it. For this reason, transparency is good condition for creating cartel and maximizing profits. In other word, if market include communication undertakings can act anti-competitive easily.
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3. How to Create Anti-Competitive Agreements?
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Anti-competitive agreements is tool for restrict competition in the market due to maximizing undertakings’ profits. It doesn’t have to be legal. It means that doesn’t matter whether is legal or illegal. Competition Authority looks that is there an agreement between undertakings. Moreover, this agreement can be written or oral; doesn’t have to be binding contract under the rules of law. Undertakings can came together and decide their anti-competitive behaviors which are mutual understandings and consensus. If it is an anti-competitive agreement, it must be include undertakings’ anti-competitive expressions. It includes that consensus to decreasing competition and mutual understandings to maximize profits. Some examples for anti-competitive agreements: fixing prices, market sharing, blocking to market entry and information sharing.
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4. Result
As a consequently, creating cartel is forbidden. When undertakings behave anti-competitive, they will be penalized by the Competition Authority. It is one anti-competitive behavior in all competition law. In this article, we see suitable conditions for cartel and creating anti-competitive agreements; but of course, competition law is more than that.
References
- Aslan, İsmail Yılmaz, Rekabet Hukuku Teori, Uygulama, Mevzuat, Bursa 2017
- Kahraman, Zafer, Competition Law Lessons, İstanbul 2020
- http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:12016M/TXT
- http://eur-lex.europa.eu/legal-content/en/TXT/?uri=celex%3A12016E%2FTXT
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