Editing Cartel (section)

== Legislation and penalties ==
Because cartels are likely to have an impact on market positions, they are subjected to [[competition law]], which is executed by governmental [[competition regulator]]s. Very similar regulations apply to [[corporate merger]]s. A single entity that holds a [[monopoly]] is not considered a cartel but can be sanctioned through other abuses of its monopoly.

Prior to World War II, members of cartels could sign contracts that were enforceable in courts of law except in the United States. Before 1945, cartels were tolerated in Europe and specifically promoted as a business practice in German-speaking countries.<ref>{{Cite book|title=Competition Policy in the European Union|last1=Cini|first1=Michelle|last2=McGowan|first2=Lee|publisher=Palgrave Macmillan|year=2009|isbn=978-0-230-00675-1|location=New York|pages=63}}</ref> In ''U.S. v. National Lead Co. et al.'', the [[Supreme Court of the United States]] noted the testimony of individuals who cited that a cartel, in its versatile form, is {{blockquote|a combination of producers for the purpose of regulating production and, frequently, prices, and an association by agreement of companies or sections of companies having common interests so as to prevent extreme or unfair competition.<ref>{{Cite book|title=Strategies to Achieve a Binding International Agreement on Regulating Cartels: Overcoming Doha Standstill|last=Lee|first=John|publisher=Springer|year=2016|isbn=978-981-10-2755-0|location=Berlin|pages=13}}</ref>}}

The first legislation against cartels to be enforced was the [[Sherman Antitrust Act of 1890|Sherman Act 1890]], which also prohibits price fixing, market-sharing, output restrictions and other anti-competitive conduct.<ref>{{Cite book|last=Sullivan|first=E. Thomas|title=The political economy of the Sherman Act: The first one hundred years|publisher=Oxford University Press|year=1991|isbn=9780195066425}}</ref> Section 1 and 2 of the Act outlines the law in regards to cartels,<blockquote>Section 1:

Every contract, combination in the form of [[Trust (19th century)|trust]] or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal.<ref>{{Cite web|title=15 U.S. Code § 1 - Trusts, etc., in restraint of trade illegal; penalty|url=https://www.law.cornell.edu/uscode/text/15/1|access-date=2021-04-26|website=LII / Legal Information Institute|language=en}}</ref>

Section 2:

Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine not exceeding $100 million if a corporation, or, if any other person, $1 million, or by imprisonment not exceeding ten years, or by both said punishments, in the discretion of the court.<ref>{{Cite web|title=15 U.S. Code § 2 - Monopolizing trade a felony; penalty|url=https://www.law.cornell.edu/uscode/text/15/2|access-date=2021-04-26|website=LII / Legal Information Institute|language=en}}</ref></blockquote>

In practice, detecting and desisting cartels is undertaken through the use of economic analysis and leniency programmes. Economic analysis is implemented to identify any discrepancies in market behaviour between both suspected and unsuspected cartel engaged firms. A structural approach is done in the form of screening already suspicious firms for industry traits of a typical cartel price path. A typical path often includes a formation phase in which prices decline, followed by a transition phase in which prices tend to rise, and end with a stationary phase in which price variance remains low.<ref>{{Cite journal|last1=Harrington|first1=Joseph E. Jr.|last2=Chen|first2=Joe|date=2002|title=Cartel Pricing Dynamics with Cost Variability and Endogenous Buyer Detection|url=https://ideas.repec.org/p/jhu/papers/514.html|journal=The Johns Hopkins University,Department of Economics|language=en|via=Economics Working Paper Archive}}</ref> Indicators such as price changes alongside import rates, market concentration, time period of permanent price changes and stability of companies' market shares are used as economic markers to help supplement the search for cartel behaviour.<ref>{{Cite journal|last=IVALDI|first=Marc|title=Cartel Damages to the Economy: An Assessment for Developing Countries|url=https://pedl.cepr.org/sites/default/files/Ivaldi%20et%20al._Cartel%20Damages%20to%20the%20Economy.pdf |archive-url=https://web.archive.org/web/20220627233303/https://pedl.cepr.org/sites/default/files/Ivaldi%20et%20al._Cartel%20Damages%20to%20the%20Economy.pdf |archive-date=June 27, 2022 |url-status=live|journal=Toulouse School of Economics and CEPR|via=CEPR}}</ref> On the contrary, when aiming to create suspicion around potential cartels, a behavioural approach is often used to identify behavioural collusive patterns, to initiate further economic analysis into identifying and prosecuting those involved in the operations. For example, studies have shown that industries are more likely to experience collusion where there are fewer firms, products are homogeneous and there is a stable demand.<ref>{{Cite journal|last1=Grout|first1=Paul|last2=Sonderegger|first2=Silvia|date=2005|title=Predicting Cartels|url=https://danielmorochoruiz.files.wordpress.com/2018/02/paul-grout-structural-approaches-to-cartel-detection.pdf |archive-url=https://ghostarchive.org/archive/20221009/https://danielmorochoruiz.files.wordpress.com/2018/02/paul-grout-structural-approaches-to-cartel-detection.pdf |archive-date=2022-10-09 |url-status=live|journal=Office of Fair Trading, Economic Discussion Paper|via=European University Institute}}</ref>

=== Leniency programmes ===
Leniency programmes were first introduced in 1978 in the US, before being successfully reformed in 1993.<ref>{{Cite web|date=2015-06-25|title=Leniency Program|url=https://www.justice.gov/atr/leniency-program|access-date=2021-04-26|website=www.justice.gov|language=en}}</ref> The underlying principle of a leniency program is to offer discretionary penalty reductions for corporations or individuals who are affiliated with cartel operations, in exchange for their cooperation with enforcement authorities in helping to identify and penalise other participating members. According to the Australian Department of Justice, the following 6 conditions must be met for admission into a leniency program:

# The corporation is the first one to come forward and qualify for leniency with respect to the illegal activity being reported;
# The Division, at the time the corporation comes in, does not yet have evidence against the company that is likely to result in a sustainable conviction;
# The corporation, upon its discovery of the illegal activity being reported, took prompt and effective action to terminate its part in the activity;
# The corporation reports the wrongdoing with candor and completeness and provides full, continuing and complete cooperation that advances the Division in its investigation;
# The confession of wrongdoing is truly a corporate act, as opposed to isolated confessions of individual executives or officials;
# Where possible, the corporation makes restitution to injured parties; and
# The Division determines that granting leniency would not be unfair to others, considering the nature of the illegal activity, the confessing corporation's role in it, and when the corporation comes forward.<ref>{{Cite journal|last=Martyniszyn|first=Marek|date=2017|title=Foreign State's Entanglement in Anticompetitive Conduct|url=https://papers.ssrn.com/abstract=3116910|language=en|location=Rochester, NY|ssrn=3116910}}</ref>

The application of leniency programme penalties varies according to individual countries policies and are proportional to cartel profits and years of infringement. However, typically the first corporation or individual to cooperate will receive the most reduced penalty in comparison to those who come forward later.<ref>{{Cite web|last=Commission|first=Australian Competition and Consumer|date=2019-09-04|title=ACCC immunity & cooperation policy for cartel conduct - October 2019|url=https://www.accc.gov.au/publications/accc-immunity-cooperation-policy-for-cartel-conduct-october-2019|access-date=2021-04-26|website=Australian Competition and Consumer Commission|language=en}}</ref> The effectiveness of leniency programmes in destabilising and deterring cartels is evidenced by the decreased formation and discovery of cartels in the US since the introduction of the programmes in 1993.<ref>{{Cite journal|last=Miller|first=Nathan H.|date=2009|title=Strategic Leniency and Cartel Enforcement|url=https://www.jstor.org/stable/25592481|journal=The American Economic Review|volume=99|issue=3|pages=750–768|doi=10.1257/aer.99.3.750|jstor=25592481|issn=0002-8282}}</ref> Some prosecuted examples include:

* [[File:The number of cartel discoveries per six-month period in the US.png|thumb|Graph showing the decline in formation and discoveries of cartels in the US following the introduction of leniency programmes in 1993.  Following the introduction, cartel formations and discoveries decreased to all time lows.]][[Lysine price-fixing conspiracy|Lysine]] Cartel: An employee of [[Archer Daniels Midland|Archer Daniels Midland (ADM)]] alerted authorities of the existence of the cartel within the Lysine industry.<ref>{{Cite journal|last=Connor|first=John M.|date=1998|title=Lysine: A Case Study in International Price-Fixing|url=https://www.jstor.org/stable/43663287|journal=Choices|volume=13|issue=3|pages=13–19|jstor=43663287|issn=0886-5558}}</ref>
* Stainless steel: Buyers of the product complained to the [[European Commission|European Commission (EC)]] about price spikes.<ref>{{Cite web|title=Competition - Cartels - Cases - European Commission|url=https://ec.europa.eu/competition/cartels/cases/cases.html|access-date=2021-04-26|website=ec.europa.eu}}</ref>
* Sodium gluconate: Defendants in the lysine case informed authorities of collusive behaviours between corporations in this industry.<ref>{{Cite web|title=Case search - Competition - European Commission|url=https://ec.europa.eu/competition/elojade/isef/case_details.cfm?proc_code=1_36756|access-date=2021-04-26|website=ec.europa.eu}}</ref>

=== Price fixing ===
Today, price fixing by private entities is illegal under the antitrust laws of more than 140 countries. The commodities of prosecuted international cartels include [[lysine]], [[citric acid]], [[graphite]] electrodes, and bulk [[vitamin]]s.<ref>Connor, John M. (2008): ''Global Price Fixing: 2nd Paperback Edition''. Heidelberg: Springer.</ref> In many countries, the predominant belief is that cartels are contrary to free and fair competition, considered the backbone of political democracy.<ref>{{Cite book|title=Controlling International Technology Transfer: Issues, Perspectives, and Policy Implications|last1=Sagafi-Nejad|first1=Tagi|last2=Moxon|first2=Richard|last3=Perlmutter|first3=Howard|publisher=Pergamon Press|year=2017|isbn=978-0-08-027180-4|location=New York|pages=180}}</ref> Maintaining cartels continues to become harder for cartels. Even if international cartels cannot be regulated as a whole by individual nations, their individual activities in domestic markets are affected.<ref>Fellman & Shanahan, p.&nbsp;224.</ref>

Unlike other cartels, export cartels are legal in virtually all jurisdictions, despite their harmful effects on affected markets.<ref>{{cite journal |last1=Martyniszyn |first1=Marek |title=Export Cartels: Is it Legal to Target your Neighbour? Analysis in Light of Recent Case Law |journal=Journal of International Economic Law |date=2012 |volume=15 |issue=1 |page=181 |doi=10.1093/jiel/jgs003 |s2cid=153887704 |url=https://pure.qub.ac.uk/en/publications/export-cartels-is-it-legal-to-target-your-neighbour-analysis-in-light-of-recent-case-law(76b0a369-a9db-4f5e-aadb-7ffdc7b84164).html }}</ref>