There are some agreements which are assumed to be unreasonable thus it is
treated as unlawful or illegal. Cartels are coming under this head of agreements
that is causing grave amount of harm to consumers as well as our
economy. Across the world, cartels are considered to be the most anamorphic
behavior or act under any competitive regime.
Competition in the market is having many advantages like it helps in improving
the quality, makes the consumers aware of good products and services and the
most important thing is that competition lowers the price. And thus, higher
amount of benefits can be derived from competitive market. Monopoly is the just
opposite of competition which is the result of cartel (some producers instead of
competing they join an association instead of competing).
Northern Pacific R Co. V. United States U.S.356 (1958)
It was observed that there are certain agreements or practice which are
conclusively presumed to be unreasonable and therefore illegal because of their
pernicious effects on competition and lack of any redeeming virtue.
Section 2 (c) of Competition Act,2002  defines cartel as; 'Cartel
includes includes an association of producers, sellers, distributors, traders,
service providers who enter in to an agreement among themselves to limit
control, attempt to limit control production, distribution, sale, price of goods
or provision of services.'
Roughly, making any formal or informal agreement by the firms in an industry for
restricting the competition in the market we can call it as a cartel.
Effects of Cartel
Cartels results in monopoly which hinders the smooth and easy flow of market
forces. The member producers of cartels make profits at the expense of poor
consumers. Thus, the direct impact of cartel is put up on the shoulders of
consumers that they have to pay more amount on the goods or service that they
purchase or avail compared with a competitive market.
Types Of Cartels
There Are 4 Types Of Cartels:
Price Fixing When competing business enterprise enter in to an agreement with an
objective of fixing, controlling, or maintaining the price of goods and
services it is called as price fixing. Price fixing controls the market and
it may result in fixing unreasonable and high prices over the goods and
services. Price fixing agreement is a form of elimination of competition in
the market thus it is unlawful per se.
Market Sharing When competing business enterprises enter in to an agreement, they do not
produce any goods in competition each other or they will not sell in each
other's allocated geographic areas or they will not sell to each other's
existing customers it is called as market sharing agreement. Here the
competitors are dividing or allocating the market thus they are removing
competition in the market.
Quantity Limiting When competing business enterprises enter in to an agreement to cut down
volume of output or restrict amount of production thus, they can limit the
supply of products and raise the prices these agreements are called as
quality limiting agreements and they are illegal per se.
Bid Rigging It is also called as collusive tendering. When 2 or more competitors enter
in to an agreement that they will not fight for a particular tender, this
agreement is called as bid rigging agreement. Here the participants of the
bid are helping on participant to win the tender.
Penalty For Cartel
Under Competition Act,2002 the highest amount of penalty is given to cartels
which is provided under Section 27 of Act .
section 27 (b) proviso 
In case any agreement referred to in section 3 (Anti-Competitive Agreement) has
been entered by a cartel the commission may impose upon each producer, seller,
distributor, trader, service provider included in that cartel, a penalty of up
to three times of its profit for each year of the continuance of such agreement
or ten percent of its turnover for each year of the continuance of such
agreement, whichever is higher.
Cartels in all sense is a curse to markets globally. The antithesis of
competition is monopoly which is the by-product of cartels. The monopoly that is
being created by the way of cartel is never going to create a pathway towards
progress in markets. Cartels are presumed to have an Appreciable Adverse Effect
on competition, as only few producers growing at the expense of their customers.
Consumers are considered to be the king of market but cartel of businessmen are
hindering competition and as a result preventing the benefits of consumers.
- Northern Pacific R Co. V. United States U.S.356 (1958)
- Section 2 (c) of Competition Act, 2002
- Section 27 of Competition Act, 2002
- Section 27 (b) proviso of Competition Act, 2002