What are cartels?

The cartel is the association between companies in the same branch of production with the aim of dominating the market, disciplining competition and maximizing their profits.

The parties agree to standardize a price, guaranteeing a high value for their products or services.

The formation of a cartel is illegal , as it damages the economy and consumers’ access to free competition.

The formation of the cartel and its impact on the economy

The formation of a cartel, also known as cartelization , happens when two or more companies in the same branch act together, combining the price of their products, the offer and in some cases the regional distribution.

This association between companies, whether explicit or implicit, aims to maximize profits and establish market slicing agreements. Thus, traders control their sector and strategically avoid great competition.

It is important to remember that matching the price is not having the same price. The objective of forming a cartel is to maintain a level price, with small margins set more or less. This amount will always be agreed to be profitable for the merchants involved.

However, this whole scheme between companies directly affects the consumer and the economy. In the formation of a cartel, the consumer loses, because when there is competition between companies, prices become accessible to those who consume the products, an act that is prevented in cartelization.

In addition, the formation of a cartel is harmful to the economy because it prevents the entry of new competing companies in the business, reducing the law of supply and demand.

Examples of cartels

There are several examples of cartels, even in our daily lives. One of the most well-known are gas stations , which within a given region control the price of their product so that there is little competition and, consequently, loss of profitability in the sale of fuels.

Another common example is public transport . Even though they are managed by private companies in most cases, the ticket price is fixed and agreed between all the entities involved.

The OPEC (Organization of Petroleum Exporting Countries) is considered by economists as one of the largest cartels in the world, as it manages to monopolize the production and distribution of oil in the world chain, preventing any free competition.

What does Brazilian law say about the cartel?

In Brazil, there are laws and penalties for cartel formation. The current law 8137 of 1990 considers the agreement between companies as a “crime against the economic order”. This legislation aims to end the control of the market, which limits competition.

The penalty for companies that make up the cartelization is 2 to 5 years in prison, in addition to a fine.

The cartel also has an administrative ban, which is in Law 12,529 of 2011. All acts that involve the formation of a cartel are administered by CADE , the Administrative Council for Economic Defense.

Within the scope of CADE, the penalty is calculated on the billing of companies involved in a cartel and there is also a financial penalty for the executives of these companies and other individuals who perform the actions of a cartel.

 

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