The Science Of ...

How cartels control prices, hinder competition and make life more expensive

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A cartel is an agreement between competing firms or entities to control prices or exclude entry of new competitors into a market.

It is a formal organisation of sellers - or buyers - that agrees to fix selling prices, purchase prices or reduce production using a variety of tactics.

The most well-known cartel is, probably, the Organisation of the Petroleum Exporting Countries (Opec).

The Money Show’s Bruce Whitfield interviewed Ros Lake, Director in Competition at Norton Rose Fulbright.

Scroll down for quotes from the audio below.

Cartel members have an understanding that they won’t compete with each other.

Ros Lake, Director in Competition at Norton Rose Fulbright

Cartels can, in limited circumstances, be beneficial.

Ros Lake, Director in Competition at Norton Rose Fulbright

The majority of cartels are designed to elevate pricing.

Ros Lake, Director in Competition at Norton Rose Fulbright

South African cartels aren’t very successful.

Ros Lake, Director in Competition at Norton Rose Fulbright

We have ‘leniency’ legislation in South Africa to incentivise cartel members to expose other members of the cartel.

Ros Lake, Director in Competition at Norton Rose Fulbright

The Competition Act provides for certain exemptions.

Ros Lake, Director in Competition at Norton Rose Fulbright

A monopoly is not necessarily a bad thing. There are some very dominant, very efficient firms.

Ros Lake, Director in Competition at Norton Rose Fulbright

In the last year there’s been four ‘dawn raids’ on suspected cartels.

Ros Lake, Director in Competition at Norton Rose Fulbright

The ‘leniency law’ is the best way to crack cartels.

Ros Lake, Director in Competition at Norton Rose Fulbright

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This article first appeared on 702 : How cartels control prices, hinder competition and make life more expensive


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