What is the Difference Between Cartel and Collusion?
🆚 Go to Comparative Table 🆚The main difference between a cartel and collusion lies in the level of organization and formality of the agreement between firms in the same industry to reduce competition and increase prices or profits.
Cartel:
- A cartel is a formal agreement between competitors in a specific industry to cooperate in setting prices and controlling levels of production.
- Cartels are more organized and often involve a written agreement among the participating firms.
- Examples of cartels include the Organization of Petroleum Exporting Countries (OPEC) and the drug cartels.
Collusion:
- Collusion is an informal arrangement between firms to secretively fix prices and agree on other aspects of competition, such as not competing in certain products or services.
- Collusion can occur without any direct communication between the firms, which is referred to as tacit collusion.
- Both cartels and collusion are considered unfair and anti-competitive behavior, violating antitrust laws in many countries, including the United States.
In summary, a cartel is a more organized and formal arrangement between firms to reduce competition and increase prices, while collusion is an informal agreement between firms to engage in anti-competitive behavior. Both practices are considered unfair and are subject to legal sanctions in many jurisdictions.
Comparative Table: Cartel vs Collusion
Here is a table comparing the differences between a cartel and collusion:
| Feature | Cartel | Collusion |
|---|---|---|
| Definition | A cartel is a group of companies or organizations that come together to control the production, pricing, and distribution of a particular product or service, eliminating competition and increasing profits for all members. | Collusion is an illegal and secret agreement between two or more companies to deceive, manipulate, or gain an unfair market advantage. |
| Formation | Cartels are formed through formal agreements between a group of producers of a good or service to regulate supply and manipulate prices. | Collusion involves people or companies that would typically compete against one another, but who conspire to work together to gain an unfair market advantage. |
| Legality | Some cartels are legal and even encouraged in certain situations, such as agricultural cooperatives in the United States. However, most cartels are considered anti-competitive and are prohibited by anti-trust laws like the Sherman Act and the Clayton Act. | Collusion is generally considered an anti-competitive and illegal practice, with antitrust laws aiming to prevent it. |
| Examples | Examples of cartels include OPEC, which controls the production and pricing of oil, and agricultural cooperatives in the United States. | Examples of collusion include price-fixing, synchronized advertising, and sharing insider information. |
In summary, a cartel is a group of companies that work together to control the production, pricing, and distribution of a product or service, while collusion involves secret agreements between companies to gain an unfair market advantage. Cartels can be legal in certain situations, whereas collusion is generally considered an anti-competitive and unlawful practice.
- Cartel vs Monopoly
- Conspiracy vs Complicity
- Collaboration vs Compromise
- Collaboration vs Cooperation
- Joint Venture vs Collaboration
- Teamwork vs Collaboration
- Accomplice vs Conspirator
- Smuggling vs Trafficking
- Bribery vs Corruption
- Gang vs Mafia
- Aiding vs Abetting vs Conspiracy
- Coordination vs Cooperation
- Advocacy vs Conciliation
- Arbitration vs Conciliation
- Sedition vs Treason
- Conciliation vs Mediation
- Crime vs Delict
- Negotiation vs Bargaining
- War vs Conflict