Cartel

Cartel Meaning:
An agreement between firms that would otherwise be competitors to coordinate their efforts, in order for example to fix prices or allocate territory.

Cartel Example:
Cartels are forbidden by competition law as they are seen to restrict the competition that would otherwise take place and provide downwards pressure on prices. However, some argue that regulation is unnecessary as cartels are inherently instable and will break up even in the absence of regulation. The reason for this is said to be that the temptation for firms in a cartel to cheat on the cartel and increase their profits at the expense of the other firms will be too great to be resisted for very long.