Domestic cartel

Nature

The cartel is a form of monopolistic agreement among companies, usually belonging to one economic sector, for the purpose of extracting monopolistic profits through quotas regulating the volume of production and of products marketed for all its basic participants.

Background

The significance of domestic cartels emerged in the early 20th century as industrialized nations observed collusive practices distorting national markets. Investigations in the 1920s and 1930s, particularly in Europe and North America, revealed how such alliances suppressed competition and manipulated prices. Over subsequent decades, heightened scrutiny by competition authorities and international organizations underscored the pervasive impact of domestic cartels, prompting legislative reforms and cross-border cooperation to address their economic and social consequences.

Incidence

Domestic cartels continue to undermine market competition in numerous countries, affecting sectors such as construction, food, energy, and transportation. Investigations by competition authorities worldwide reveal that price-fixing, bid-rigging, and market allocation agreements among domestic firms inflate consumer prices and stifle innovation. The prevalence of such cartels, often operating covertly, has led to significant economic losses and reduced public trust in market fairness, making this a persistent global concern.
In 2022, the Competition Commission of India uncovered a cement cartel involving major domestic manufacturers. The companies were found to have colluded to fix prices and restrict supply, resulting in substantial penalties and highlighting ongoing cartelization risks in the Indian construction sector.

Claim

Domestic cartels are a grave threat to fair competition and economic justice. By colluding to fix prices, limit supply, or divide markets, these secretive alliances exploit consumers, stifle innovation, and undermine trust in the marketplace. Their unchecked power leads to inflated costs and reduced choices for everyone. Tackling domestic cartels must be a top priority for regulators and lawmakers to protect the public interest and ensure a healthy, competitive economy.

Counter-claim

The concern over domestic cartels is vastly overstated. In reality, their impact on markets and consumers is minimal compared to global economic forces and technological innovation. Most industries are too competitive for cartels to survive, and existing regulations already deter collusion. Focusing on domestic cartels distracts from more pressing economic issues. Frankly, the so-called “problem” of domestic cartels is little more than a regulatory boogeyman with negligible real-world consequences.