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People of the same trade seldom meet together,

even for merriment and diversion; but the
conversation ends in a conspiracy against the
public, or in some contrivance to raise prices.

Adam Smith in ‘The Wealth of Nations’.

Presented by
Deepa Chandrasekar IIPM Gurgaon
Cooperative Oligopoly
 When there are only small number of firms Non
Cooperative & Cooperative behaviour .
 Firms operate in a cooperative mode when they
try to control competition
 They engage in collusion.
 Two or more firms jointly set prices

 Divide the market among them

 Make business decision jointly

What is cartelisation?
 Cartel is an arrangement of independent
firms, producing similar products.
 They work together
 Organise and Control distribution
 To set Prices
 To Reduce Competition
 To Share Technical Expertise
 To Lower Total Production
 To Raise list Prices
Cartels are formed .
 Economies of Scale
 Standardized products offer consumers
price reductions driven by economies of
scale and supplier substitution effects.
 However a relatively small number of
suppliers of any commodity gives rise to
the possibility of price fixing and collusive
Handsome Monopoly Profit

Price Marginal Cost

Average Cost


Total Demand
Of the Industry

Marginal Revenue

Q Output
Same Hike On Same Day!

 GSM operators
Bharti Airtel,
Essar and Idea
Cellular for
forming a
cartel .
GSM Operators get slammed
for forming cartel
 They all fixed the tariff of their local call at Rs 1.20 a
 Tariff hike targeted especially at low-end users
indicates the operator’s concern about declining
 Consumer groups, however, pointed out that the
operators have not given any publicity to the
increase in tariffs to create awareness among
 The telcom operators
increased the tariff of their
local call at Rs 1.20 a
 All the three operators
revised the tariff rates on
the same date
 All the operators intimated
the TRAI post revision on
same day (i.e. August 16,
Free to Fix any Tariff
 TRAI refused to intervene in this cartel as
GSM operators are free to fix any tariff for
their services
 “But it can not be mere coincidence” that the
tariff revision by them is of the identical
 The MRTPC Bench directed the three
companies to give explanation.
Cartel in union for 17 years

• Prices of cement are

kept artificially high.
• Government warned
that the companies
should work to bring
down the cement
• Companies
suggested to
Nationalise them.
Cartelisation in cement sector
 An internal investigation by the MRTPC,
revealed cartelisation leading to 'exorbitant'
increase in cement prices.
 The government allowed imports from
Pakistan to meet the demand
 The price of cement sold by Indian co’s were
approx. 50% higher than the landed price of
imported cement.
Cartelisation in cement sector

 Apparently such a high price differential

between the international prices and the
domestic prices was a indication that all is
not well within the cement industry.
 The cement lobby raised the issue of
Pakistani factories not having ISI license.
 But the MRTP Commission passed only
cease and desist orders, which have had no
penal impact.
Cartels formed by the Truckers

 Truckers’
strike hit the
nation in late
Cartelisation in Aviation industry

 The Jet-Kingfisher alliance is seen as

one such.
 Though the professed reason for the alliance is
reduce the operational expense
 The outcome could well be the exploitation of
passengers through such means as route
rationalisation and higher tariffs.
Penalised Cartels
 October 2005 The United States Department of
Justice slapped a fine of $300 million on
Samsung Electronics for participating in an
international conspiracy to fix prices in the DRAM

 October 2004 Infineon Technologies AGcompany

was sentenced a fine of $160 million for
participating in the conspiracy to fix prices in the
DRAM market.
The Cartel Attack
 October 2003 The European Commission fined
Aventis €99 million for its alleged involvement
in a cartel alongside four Japanese companies
for controlling price of the sorbates. The five
companies controlled up to 85% of European
sorbates market and met twice a year to set
prices and production quotas.
Why Cartels exists in India?
 The MRTP Act is still the extant competition law in
India, as the Competition Act has not yet been fully
 It might take at least three years from now for the
Competition Act to come into full swing .
 Competition Commission of India can actually
impose monetary penalties on companies, but it
hasn’t done yet since the commission is not fully
operational yet .
Success of Cartels in India
 Even if monetary penalties are imposed, that is not a
deterrent for companies to return back to such
 Both the Central and State governments are empowered
to take complaints to the MRTP Commission.
 not a single case has been filed under the MRTP Act by
any government.
 cease and desist’ orders were issued, which were often
How to Handle cartels in india?
 In United States and Brazil there are
provisions of imprisonment, which nowhere
exist in India.
 Belgium – member of the European Union
has this provision of rewarding cartel whistle
 Authorities have power to tap phones .
 Conduct raids to unearth evidence of cartels.
Thank you