A cartel is a union of a number of companies that agree to cooperate to limit competition and increase their profits. Usually, when they unite and control the market, they agree to set prices, control production, allocate territories and prevent the entry of new competitors in the market. In this article we will provide you the information about the Drug Cartel.
A cartel is like a secret group of companies that agree to work together and not compete with each other. They do this so they can control the market and make sure they make more money. This means they can set higher prices for consumers and limit the number of products sold.
Although it may seem like a complex organization, and although in practice it is, it is not at all different from the cartels and types of cartels we have seen so far.
Drug cartels are criminal organizations that, just like in the legal market, come together in the illegal market to control drug trafficking in a city or country. In the same way that occurs with other types of cartels, drug cartels control production, control distribution, and fully control the value chain, therefore they also control prices, among other issues.
Just as OPEC does with oil, the drug cartels do with drugs. By controlling the drug market and the value chain, from beginning to end, they can control prices, making sure that they do not fall and their profits are reduced in a market of free competition.
Here are some examples of cartels:
- Oil Cartels – One of the best known cartels is the Organization of the Petroleum Exporting Countries (OPEC), which was formed in 1960 to coordinate the oil policy of its members and stabilize oil prices on the world market.
- Drug Cartels – Drug cartels, such as the Sinaloa cartel in Mexico, are organizations that control the production, trafficking, and distribution of illicit drugs throughout the world.
- Cement cartels : Several cement cartels have been exposed around the world, such as the cement cartel in Spain, which was uncovered in 1991 and led to the conviction of several companies and executives.
- Electronics cartels – Several electronics cartels have been uncovered around the world, such as the computer monitor cartel, in which various companies agreed to fix prices and limit production of computer monitors.
- Construction cartels – Various construction cartels have been uncovered around the world, such as the construction cartel in Germany, in which various companies agreed to fix prices and allocate construction projects among themselves.
- Automotive industry cartels : In 2016, a cartel of truck manufacturers in Europe including DAF, Daimler, Iveco, MAN, Scania and Volvo/Renault was uncovered. These companies agreed to fix prices and delay the implementation of new technologies.
- Food industry cartels : In 2010, several poultry companies in the US were found to have conspired to limit production and fix prices. In another example, chocolate companies in Canada were found to have conspired to fix prices in the 1990s.
- Air transport cartels : In 2016, the European Commission fined several airlines, including Air France-KLM, British Airways and Lufthansa, for their participation in an air cargo cartel. The airlines agreed to fix prices and coordinate their commercial activity.
- Energy cartels : In 2010, it was discovered that several electric power companies in South Korea had conspired to limit the supply of electricity and fix prices.
Characteristics of a drug cartel
The main characteristics of a cartel are the following:
- They are a group of companies that cooperate : The companies that are part of the cartel agree to cooperate with each other to limit competition and increase their profits.
- They maintain secret agreements : The members of the cartel agree in secret to fix prices, control production, allocate market territories and prevent the entry of new competitors in the market.
- Their objective is to control the market : The members of the cartel have great market power, which allows them to control production and set prices in the market.
- In addition to increasing your profits : The consequence of controlling the market is to increase the profits of its members, which often implies setting higher prices for consumers.
- They are usually illegal : In most countries, cartels are illegal because they limit competition and can result in higher prices for consumers.
- They are sanctioned by governments and authorities : Governments and antitrust authorities often take steps to investigate and sanction cartels to protect consumers and promote fair competition in the marketplace.
What are the objectives of a cartel?
Some cartels may work to stabilize prices and avoid volatility in the markets, which can be beneficial to both producers and consumers. For example, the Organization of the Petroleum Exporting Countries (OPEC) is a cartel that works to regulate oil production and stabilize crude oil prices.