Cartel Legal Definition:

An agreement between two or more merchants to create or control a monopoly, to lessen or prevent competition.

Related Terms: Monopoly , Oligopoly

Cartel has a distinct meaning in commercial law and in military/international law.

Commercial Law

In US v National Lead, Justice Rifkind of the New York District Court adopted these words:

"A combination of producers of any product joined together to control its production, sale and price, and to obtain a monopoly in any particular industry or commodity....

"In an ultratechnical way, a cartel might be defined as a combination of producers for the purpose of regulating as a rule, production, and, frequently, prices. That does not involve giving up the identity of the different firms. It is not usually made for a period lasting more than a limited time. It does not necessarily carry with it, though in some cases it does, joint selling agencies. Sometimes, too, it carries with it quotas of production....

"A cartel ... usually means an association by agreement of companies ... having common interests. It is designed to prevent extreme or unfair competition and allocate markets, and it may also extend to interchange of knowledge resulting from scientific and technical research, exchange of patent rights, standardization of products, etc. Competition is not eliminated, but it is regulated. Competition in quality, efficiency, and service takes the place of the crude method of price cutting.

"These quotations both emphasize the central fact that cartel activities are arrangements among business enterprises engaged in the same type of industry to avoid some or all forms of competition. Cartel activities are designed to maximize the profits of participants by directly or indirectly maintaining prices at the level of greatest net return.

"International cartels are, of course, cartels which include business enterprises domiciled under more than one government and doing business across national frontiers. A cartel of this type may include the major enterprises operating in a given industrial field throughout the world, and may determine trade policies in that field in most, if not all, of the world's principal markets."

In Chicago Pro. Sports Limited, Justice Easterbrook of the United States Court of Appeals noted that:

"Agreements limiting to whom, and how much, a firm may sell are the defining characteristics of cartels...."

Canada's Competition Bureau, circa 2011, defined a cartel as follows:

"A cartel is a formal or informal group of otherwise independent businesses whose concerted goal is to lessen or prevent competition among its participants.

"Typically, cartel members enter into an agreement or arrangement to engage in one or more anti-competitive activities, such as to fix prices, allocate markets or customers, limit production or supply, or rig bids."

In Business Electronics, Justice Antonin Scalia of the Supreme Court of United States remarked that:

"Cartels are neither easy to form nor easy to maintain. Uncertainty over the terms of the cartel, particularly the prices to be charged in the future, obstructs both formation and adherence by making cheating easier."

Note also the related term cartelizing.

See also monopoly.

Military/International Law

Also has an international law usage as referring to "an agreement between states as to the exchange of prisoners during war" (Osborne, page 66) and a cartel ship would be a vessel transporting prisoners of war to be thus exchanged (Mozley & Whitley, 7th Ed., page 54).

In Bledsoe and Boczek's 1987 offering:

"Cartel: an agreement entered into by parties to an armed conflict for the exchange of prisoners of war.

"In its broader sense, a cartel is any agreement between belligerents for the purpose of arranging and regulating certain kinds of nonhostile relations otherwise barred by reason of the existence of the conflict."

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