What is a Cartel | Types of Cartels

What is a Cartel?

A cartel is a form of combination in which independent business firms in an industry agree to regulate their output, to fix sales quotas and to control sales contracts and prices.

A cartel is a voluntary association formed with the objective of eliminating competition and to secure monopoly in the market. To achieve their objective, various restrictive measures are imposed by them. In this arrangement several business units dealing in the same line of business agree to pool the output with the cartel. The cartel will sell the output and distribute profits in a per-determined basis. Germany is the birth place of cartels.

In a cartel, the manufacturers and dealers fix prices, restrict output, pool the output and also establish a common agency through which the output is sold.

Types of Cartels

Von Beckereth has classified cartels into the following types:

1. Quota fixing cartels: The objective of these cartels is to restrict supply. To achieve this objective they seek to limit production, by fixing production quotas for each member. No member can produce more than the quota allotted to him.

2.  Price firing cartels: These cartels regulate prices by restricting output. Minimum prices are fixed for products. No member can sell products at a price lesser than the minimum price.

3. Term fixing cartels: Terms of trade are fixed by the cartels. Members have to adhere to the terms of trade fixed by the cartel. Terms of trade may relate to time of delivery, place of delivery, mode of delivery, payment terms, credit period, insurance, packing, interest charges on balance pavement etc.,

4. Customer assigning cartels: They are formed to assure a certain volume of sales to each member. They are similar to market pools. The entire market is divided among the members and a specific number or type of customers is assigned to each member. The member unit should sell its products only to those customers which have been allotted to it.

5. Zonal cartels:  They are similar in nature to territorial pools, They are formed to assure certain volume of sales to each member. The total market is divided territory wise and members are given the right to deal in specified territories. For e.g., the entire Indian market can be divided into North, South, East and Western zones and each zone allotted to a certain member.

6. Super cartels: They are formed on an international basis. These refer to agreements between cartels of one country with the cartels of the other countries.

7. Syndicates: In a syndicate, member units enter into an agreement to form a joint selling agency. Member units sell their products to the syndicate at a price known as accounting price. The accounting price would cover the cost of production and also includes profit margins.

The syndicate studies the market structure of individual markets and sells at the highest possible price in each market. The prices charged by the syndicate would therefore be different in different markets. Prices charged by the syndicate are more than the accounting price and profits are earned. The profits earned are shared among members. Profit ratios are generally based on the output given to the syndicate by different members.

Leave a Reply

Recent Posts

Related pages

skimming pricing examplessimilarities between management accounting and cost accountingfreehold property depreciationformula for debtors turnover ratiowhen is the corporate veil liftedbailee bailordurable consumer goods definitionprospecting in personal sellingwhat is overhead apportionmentauditing working papers examplesadvantages and disadvantages of retained profitaltra vireswhat is a duplicating machinemixed branding strategy examplesdr allocationadvantages and disadvantages of informal sectorwhat is salesman responsibilitywhat is diseconomiescomparative balance sheet definitionirda definitiongross profit ratio formulaaccounts receivable turnover ratio formulalabour turnover meaningleverage gearing ratiocaveat emptor legal definitionlimitation of operation researchventure capitalist meaningpersonnel tamil meaningconcept of elasticity in economicsparagraph on advantages and disadvantages of internetstraight numeric filing system for medical recordsrandom samplingspersistent dumping definitionquality control and pre shipment inspectionorganisation of sebitransport and marketing of agricultural producedefinition of demotionwhat are bonds and debenturesdefinition of decentralized organizationchit fund company listguidelines for effective delegationwhat is sundry creditorexceptions of caveat emptordisadvantages of collusionnsdl depositoryhundies meaningwhat is fob in accountingrole of reinsurancerbi issue departmentexport inspection council indiadisadvantages of participative leadershipnationalization of banks meaningprevity of contractcash vouchingcooperative loyalty cardfinancial leverage ratio debt equity ratiowhat does precis meanmarket economy characteristics advantages disadvantagesadvantages of numeric keypadstandard costing and budgetary controlforward market hedgingshipping term cif meansadvantages and limitations of marginal costingbase stock method of inventory valuationdisadvantages of internal rate of returninventory turnover ratio interpretationdefine consumer durablewhat does misfeasance meanadvantages of sole trader1us dollar in rupeesdefine juristic personmeaning of warehousingmerits and demerits of zero based budgetinghorizontal merger meaningfranchise benefits and drawbacksdisadvantages of marketing segmentation