What are cartels and how do they affect consumers?

Hard core cartels (when firms agree not to compete with one another) are the most serious violations of competition law.  They injure customers by raising prices and restricting supply, thus making goods and services completely unavailable to some purchasers and unnecessarily expensive for others. 

The categories of conduct most often defined as hard core cartels are:

• price fixing
• output restrictions
• market allocation
• bid rigging (the submission of collusive tenders)

Challenges in detecting hard core cartels

Cartels are very difficult to detect.  They can involve many firms in the industry and customers are rarely in a position to detect the existence of a cartel.  Antitrust enforcers should be helped in their ability to detect cartels by various means and instruments, the most effective being leniency programmes.  These programmes provide immunity or reduction in sanctions for cartel members that co-operate (or ‘whistleblow’) with competition enforcers.  Leniency programmes have been adopted by most OECD countries and have been instrumental in increasing the success rate of the detection of cartels.

The best outcomes are secured by deterring firms from forming cartels in the first place.  Strong sanctions are therefore a fundamental component of an effective antitrust enforcement policy against hard core cartels.  An important supplement to fines against organisations for cartel conduct is sanctions against individuals for their participation in the conspiracy. These sanctions can take the form of substantial administrative fines or, in some countries, the criminal sanction of imprisonment.  The prospect of incarceration can be a powerful deterrent for businesspeople considering entering into a cartel agreement.

But cartels are not always harmful...

Some horizontal agreements between companies can fall short of a hard core cartel, and in certain cases may have beneficial effects.  For example, agreements between competitors related to research & development, production and marketing can result in reduced costs for companies, or improved products, the benefits of which are passed on to consumers. The challenge for competition authorities is how to assess these agreements, balancing the pro-competitive effects against any anti-competitive effects which may distort the market.

For further information related to the OECD work on cartels and anti-competitive agreements, please contact us at DAFCOMPContact@oecd.org.

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Documents and links

• Leniency for Subsequent Applicants, 2012 (pdf)

• The Digital Economy, 2012 (pdf)
  
  
• Improving International Co-operation in Cartel Investigations, 2012 (pdf)
  
  
• Competition and Commodity Price Volatility, 2012 (pdf)
  
  
• Unilateral Disclosure of Information with Anticompetitive Effects, 2012 (pdf)

• Competition and Procurement: Key findings, 2011

• OECD Recommendation concerning Effective Action against Hard Core Cartels

• Hard Core Cartels: Third Report on the Implementation of the 1998 Council Recommendation, 2005 (pdf)

• Formal Exchange of Information between Competition Authorities in Hard Core Cartel Investigations, 2005 (pdf)

Bid rigging involves groups of firms conspiring to raise prices or lower the quality of the goods or services offered in public tenders. Although illegal, this anti-competitive practice continues to cost governments and taxpayers billions of dollars every year across OECD countries.

More on the OECD project on fighting bid rigging can be found at  www.oecd.org/competition/bidrigging.

Best practice roundtables

Calendar of activities

Competition assessment toolkit

Country reports & peer reviews

Fighting bid rigging in public procurement 

Recommendations

Reports by the Competition Committee

Reports by competition agencies

Work in progress

About global relations

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Global Forum on Competition

Latin American Competition Forum