Anti-Competitive Agreements

The prohibition of anti-competitive agreements is one of the three core areas of a competition law.

Cartels are the most serious form of anti-competitive agreements, and their prosecution is an enforcement priority in many jurisdictions. A cartel exists when businesses agree to act together, control prices and prevent new competitors from entering a certain market. This is aimed at driving up the profit of the cartel members while maintaining the illusion of competition.

The negative effects of cartels include:

  • Cartels artificially inflate input and capital costs along the supply chain. This is then passed on in higher prices or taxes for consumers as well as the public sector. It is estimated that the average price increase through cartels amounts to 10-20%.
  • Cartels lock up resources and restrict the amount of goods and services available to buyers as they interfere with the forces of supply and demand.
  • Cartels reduce innovation, research and development by protecting their own inefficient members.
  • Cartels hamper investment by denying market access to other businesses.

As cartels are difficult to detect, competition agencies have successfully initiated leniency programs to encourage cartel members to come forward with information and thus aid enforcement efforts.