An anti-competitive cartel is an agreement between companies in the same market aimed at consolidating the power of these companies.
The risks of anticompetitive agreements between companies are increased in oligopoly markets .
The word cartel is sometimes used as a synonym for an anti-competitive agreement.
What is an anti-competitive cartel?
Companies enter into an anti-competitive cartel when they agree on a strategy to strengthen their power in a particular market.
Please note, anti-competitive agreements concern companies that are autonomous, and therefore do not apply to companies that are part of the same parent company .
Anti-competitive agreements can be written or oral, explicit or not.
An anticompetitive cartel can relate to different elements such as price , quantities produced or sources of supply .
Concluding anti-competitive agreements is often illegal because it goes against the principle of free and undistorted competition which is at the heart of European Union competition policy. This principle is defined in the Treaty on the Functioning of the European Union.
Which companies can be part of an anti-competitive cartel?
Anti-competitive agreements can be horizontal or vertical depending on the relationship of the companies that are part of them.
The horizontal agreements are agreements between competitors in the same market.
The vertical agreements are agreements between companies that have a business relationship and who are not competing in the same market, such as between a manufacturer and a distributor.
The different types of anti-competitive agreements
There are different types of anti-competitive agreements. Anticompetitive cartels can relate to different parameters such as prices, quantities or market sharing.
Anti-competitive price cartel
An anti-competitive pricing agreement is also called a pricing agreement.
When companies enter into a price agreement, they agree to set a certain price for their services or products instead of allowing prices to fluctuate based on supply and demand. These companies therefore harmonize their prices upwards or downwards.
For example, we speak of an anti-competitive price cartel if several companies selling similar products agree to increase their prices at the same time.
Anti-competitive agreement relating to the quantities produced
Companies with similar products can also agree on the quantities produced in order to strengthen their position in the market.
Generally, anti-competitive agreements relating to the quantities produced aim to artificially limit these quantities in order to increase prices.
Anti-competitive market sharing agreement
Another type of cartel concerns anti-competitive cartels that define market sharing.
In this type of agreement, companies share the market. This sharing can be, among other things, a geographic sharing.
For example, we speak of an agreement on the geographical distribution of the market if two companies in the same industry in France agree that one of them will have exclusivity on the market in the North of France, while the The other will have exclusivity in the South of France.
Anticompetitive agreement and call for tenders
Anticompetitive agreements can take place during a call for tenders , a procedure during which a company wishing to purchase goods or services puts several suppliers into competition in order to select the best offer.
In these situations, an anti-competitive cartel can take place when the suppliers consult each other before making their offer. For example, suppliers can then decide on a price level for their respective offers, or even agree on which company will win the tender.
Are all agreements illegal?
Not all agreements are illegal. Certain agreements may be authorized, such as agreements to which an exemption regime may apply.
Thus, agreements between businesses which actually contribute to economic progress and which are beneficial to consumers can sometimes benefit from this exemption regime.
An example of a legal agreement between companies could be an agreement on research and development in order to facilitate technical and economic progress.
Sanctions in the event of an illegal agreement
While certain agreements between companies are authorized, other agreements are perfectly illegal and liable to heavy fines imposed by the French competition authorities, the DGCCRF, or the European Commission.
As regards the fines imposed by the European Commission, their amounts are calculated from the value of sales of goods or services made by the company related to the offense.