Cartel Definition

A cartel is an illegal agreement between companies in the same market to fix prices, divide up customers, or limit production. Cartels are formed when companies collude to reduce competition and increase profits. In many cases, cartels are harmful to consumers because they result in higher prices for goods and services.

Cartels often operate in secret, and it can be difficult to detect them. Signs that a cartel might be operating include sudden changes in prices without a corresponding change in costs, or a reduction in choices for consumers.

There are several types of cartels. Price-fixing cartels agree to charge the same price for a good or service. Output-limiting cartels restrict the amount of a good that each company produces. Market-sharing cartels divide up customers among themselves.

Cartels can be international, national, or regional in scope. The most famous international cartel was the Organization of Petroleum Exporting Countries (OPEC), which controlled the price of oil throughout much of the 20th century.