Module # 2:
Cartels - Illegal agreements between competitors Learning objectives
At the end of this module, you should be able to:
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Explain the concept of “a cartel” and why cartels are illegal
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List the types of cartel behaviour and how they affect consumers
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Explain the penalties and remedies that guilty parties may face if caught
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Explain how businesses can seek an exemption from the cartel provisions of the
Competition and Consumer Act (CCA) under certain circumstances
Introduction
A competitive marketplace benefits consumers by providing them with greater variety of choice, and allowing them to buy the goods and services they want at the best possible price. It does this by fostering enterprise, innovation and efficiency. Businesses with higher operating costs may be forced out of the market by their more efficient rivals. Fair competition also encourages businesses to produce the types of goods or services that consumers want.
A healthy competitive marketplace thrives when businesses compete fairly.
Most Australian businesses increase their customer base and their profits honestly through:
• continual innovation to improve products or services
• sales and marketing showing the genuine benefits of their products or services
• keeping costs down so they can offer competitive prices.
However, sometimes businesses struggling to compete and maintain profits may be tempted to deliberately and secretly set up or join a cartel with their competitors.
This module explains what a cartel is, why businesses might be tempted to form or join one, and why cartels are so damaging to the Australian economy. It explains the four types of cartel behaviour that businesses may engage in, along with the penalties and remedies that guilty parties may face if proven guilty in a court of law. This module also explains how
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businesses can seek an exemption from the cartel provisions of the CCA under certain circumstances. What is a cartel?
Put simply, a cartel exists when businesses agree to act together instead of competing with each other. A quick example of cartel behaviour is price fixing, when two or more businesses agree to sell particular products or services for the same price.
Cartel agreements are designed to drive up the profits of cartel members while maintaining the illusion of competition.
Cartel agreements can take on various forms, and these will be outlined in detail in this module. Cartels have been discovered operating in a wide range of industries. Cartel participants range from large, well‐known corporations to small local businesses.
Cartels are illegal under Australian law because they are anti‐competitive. That is, cartels inflate prices, minimise choice for consumers and stifle innovation. Cartels can put honest and well‐run companies out of business while protecting their own inefficient members.
Ultimately cartels undermine the efficient functioning of Australian markets.
Cartels can be local, national or international. Worldwide, cartels steal billions of dollars every year.
The legislation that makes cartels illegal in Australia is the CCA.
The government agency that investigates possible cartel behaviour and takes legal action where necessary is the Australian Competition and Consumer Commission (the ACCC).
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Why do you need to know about cartels?
When you are working in the business world, you will need to understand how the cartel laws affect your dealings with your competitors. Businesses that get involved in cartel behaviour risk being caught and facing hefty fines. Businesses that suffer loss because the law has been broken can seek compensation from the businesses that engaged in illegal cartel conduct.
If you were personally involved in the cartel agreement, you may also be personally liable to pay a fine and/or compensation. You can also be sentenced to a maximum of 10 years in jail.
‘The Marker’ – A Short Film About Cartels
The Australian Competition and Consumer
