Cartel

Competitors in a healthy market try to win customers with better prices and service. A cartel swaps that rivalry for a private arrangement. The core practices are price fixing, output restriction, market or customer allocation and bid rigging. Because members gain by cheating, cartels usually need monitoring and secrecy, which leaves a trail of meetings, messages and shared data. Authorities detect them through leniency applications, dawn raids, complaints from buyers and statistical screening of prices. Penalties can be heavy: large fines for firms, and in some countries, including the United States and the United Kingdom, prison for individuals. The term describes the agreement itself. Rivals who simply copy each other's prices without any contact are generally not a cartel. Trade associations are lawful. Lawyers reading their minutes look for talk of future prices, capacity or customers, which is where networking turns into a cartel.

Four cement producers supplying the same region meet at an industry event and agree to raise prices by 8% each January and to avoid each other's largest customers. A fifth firm, worried about its exposure, applies for leniency. The authority then raids all four producers on the same morning.