Cartel (concept)

Cartel is an ambiguous concept, which usually refers to a combination or agreement between rivals, but - derived from this - also designates organized crime. The main use of ‘cartel’ is that of an anticompetitive association in the economy. In politics, it refers to a temporary alliance of several parties in election campaigns, for example. The scientific analysis of cartels is done by cartel theory.

Different spellings

In other languages, ‘cartel’ might appear in different spellings. So it is called ‘cartello’ (in Italian), ‘Kartell’ (in German, Hungarian and Estonian), ‘Kartel’ (in Dutch, Turkish and Slavic languages), ‘Kartelli’ (in Finish), Kartelis’ (in Lithuanian). Even in same languages, the spelling has varied over the time, e.g. in German several times from the c-initial to the k-initial and back. Nevertheless, the version ‘cartel’ is the most widespread worldwide because of its validity in English, Spanish, French and Portuguese. Thus, between ‘cartels’ with a “c”- or “k”-beginning, there is no difference in meaning. However, some institution names differ mainly by this letter, e.g. the Kartellverband katholischer deutscher Studentenvereine and the Cartellverband der katholischen deutschen Studentenverbindungen both being umbrella organizations of catholic student associations in Germany.

Etymology

The word "cartel" has its root in the Greek χάρτης (= papyrus scroll, paper, map) and came about the Latin “charta” (see Magna Carta, the English medieval law), the Italian “cartello” (diminutive of carta = paper, map) and the French “cartel” into the English and German language. In the Middle Ages, it designated an agreement on the fighting rules in the knightly tournament, then for duels. Until the 18th century, also the rules for noble games and courtly contests were named so. In modern times, especially in the 18th and 19th centuries, the term "cartel" was also used for intergovernmental agreements of technical kind: The guiding idea of a conflict confining clause came to light in various treaties between belligerent states, such as “cartels” on the postal and Trade or the treatment of couriers, prisoners of war and deserters. It is not until about 1880 that the term "cartel" also means the restriction of competition between entrepreneurs. Initially, this usage was only spread in the German speaking countries in Europe. Only by and by, this novel word meaning was imported into neighboring languages (either as “Kartell” or “cartel”) and by this the economic aspect became the predominant meaning of “cartel”. In the 19th and 20th century, also social associations or political alliances were referred to as cartels, so the union of German student fraternities or the cartel parties or in the German Empire. In Belgium of the 20th and 21th century, there was the same naming for party alliances, e.g. “Vlaams Kartel”. At the beginning of the 20th century, the socialist thinker Karl Kautsky saw the possibility of even a cartel between states that would replace the imperialist competition of the great powers and establish a peaceful ultra-imperialism.

Specific uses

The term ‘’cartel’’ is normally used in a specific context, resulting in a number of content variations. So you find:

• Cartels in business, formed by enterprises or other market players,
• Labor union cartels (“Gewerkschaftskartelle”) as associations of several trade unions of the same locality, so in Germany of the late 19th and early 20th century,
• Cartels between states, example: OPEC or more generally treated in the state cartel theory,
• Party cartels in the sense of a cooperation of parties in elections and in parliament,
• Cartels as umbrella organizations of German speaking student’s fraternities,
• Cartels as criminal organizations or mafia, examples: drug cartel, Medellín cartel
• Cartels between people, meant above all derogatory, e.g. the ‘cartel of the wicked' or the ‘silent cartel’,
• Cartels as intergovernmental agreements: From the 17th to 19th centuries, there were agreements between (competing or belligerent) states on the maintenance of postal and commercial traffic, the entry and exit of couriers, prisoners of war and deserters. They also could deal with a more rational enforcement of the Customs regulations by the right of the border guard authorities to be allowed to enter the territory of the neighboring state in order to persecute smugglers.

In addition, “cartel” or “Kartel” are used as names for distinct brands, business companies, music bands or works of art.

Constituent characteristics and exclusion criteria for cartels

Cartels are not always easy to spot. In order to be able to reliably distinguish them as alliances between rivals from other forms of organization, the consideration of positive and negative indicators can be helpful.

Constituent criteria for cartels would be the following:

• The members are, at the same time, partners as well as competitors (so do e.g. enterprises, states, parties, duelists, tournament knights). These members can be individual persons or organizations.
• The members of a cartel are independent of each other, negotiating their interests with each other and against each other. So there have to be at least two participants and they determine their interests autonomously.
• The members of a cartel know each other; they have a direct relationship, in particular they communicate with each other.

Exclusion criteria for cartels would be the following:

• There is a "hierarchical" or other strong "dependency relationship among the participants": a drug mafia that is organized hierarchically and managed by a single boss can’t be a drug cartel in the sense of a real “cartel”. Likewise, a business corporation can’t be a "cartel" due to its central management, which controlles its subsidiaries. Furthermore, an OPEC, in which all adherents would be dependent on the largest member (since long: Saudi Arabia) would no longer be a "cartel". Similarly, colonial empires from a motherland and colonies do not constitute a "state cartel".
• The union of competitors, in their entirety or via important members of its association, is dependent on an outside power. A strict, state-mandated compulsory cartel without freedom of choice between the partners would not be a (real) cartel. A suitable example is the “Deutsche Wagenbau-Vereinigung” (German Railway Cars Association), which was organized in the 1920s by the “Deutsche Reichsbahn” (German Imperial Railways) - its "market opponent".
• The combination takes place between actors of different levels. Thus, the concerted actions of employers’ associations and trade unions in some industrialized countries was not a cartel, because the allies there were no homogenous competitors.
• The alleged members of a suspected cartel do not know each other, but only randomly show a parallel behavior: “Cartels of the godless”, “cartels of maintenance deniers” or “silent cartels” are therefore usually no real cartels, but pure verbal abuse formulas.

Bibliography

• Robert Liefmann: Cartels, Concerns and Trusts. London 1932.
• Harald Enke: Kartelltheorie. Begriff, Standort und Entwicklung. Tübingen 1972.
• Holm Arno Leonhardt: Kartelltheorie und Internationale Beziehungen. Theoriegeschichtliche Studien, Hildesheim 2013.