Defining Cartels

We've all heard about cartels. There is always something mysterious and edgy about the word, signifying a plethora of illegal activities. But how many of us actually understand the word and what it means? When you think cartel, drugs usually come to mind. But there is a very simple definition of a cartel that applies to numerous levels of commerce. A cartel is defined as a group of producers whose goal it is to fix prices, control supplies and limit competition. 

Though they exist both nationally and internationally, cartels are prohibited by many countries that have anti trust laws. Anti trust laws are laws that prohibit unfair business practices like price fixing. Cartels continue to exist nationally and internationally, formally and informally. 

Europe still allows some cartels, but they are completely illegal in the United States.
One way cartels circumvent antitrust laws in countries like the United States without actually setting foot here is through private entities that are often completely legitimate groups or corporations. For example, many trade organizations have been accused of fronting for cartels, as have many private institutions. 

The De Beers Diamond cartel was extremely adept at conducting business through both private individuals and companies in the United States. They fixed diamond prices by limiting the supply, placing specific numbers of diamonds with particular jewelers and individuals, and setting high prices that had to be followed by each of the jewelers and individuals to whom De Beers supplied with diamonds. 

The main operation base of cartels is centered on price fixing. This is generally illegal, but there are some exceptions. Some cartels aren't prosecuted, and here's where it gets complicated. Basically, some cartels are protected under international laws regulating their operation. When several governments get together and sanction a multilateral treaty or when a group is protected by national sovereignty, no antitrust violations can be brought against the group.