Decartelization is the transition of a national economy from monopoly control by groups of large businesses, known as cartels, to a free market economy. This change rarely arises naturally, and is generally the result of regulation by a governing body with monopoly of power to decide what structures it likes. A modern example of decartelization is the economic restructuring of Germany after the fall of the Third Reich in 1945. To truly understand the term "decartelization" requires familiarity with the term "cartel". A cartel is a formal (explicit) agreement among firms. Cartels usually occur in an oligopolistic industry (

oligopoly An oligopoly (from Greek ὀλίγος, ''oligos'' "few" and πωλεῖν, ''polein'' "to sell") is a market structure in which a market or industry is dominated by a small number of large sellers or producers. Oligopolies often result from ...

), where there are a small number of sellers, and usually involve homogeneous products (see Homogeneity and heterogeneity). Cartel members may agree on such matters as price fixing, total industry output,

market share Market share is the percentage of the total revenue or sales in a market that a company's business makes up. For example, if there are 50,000 units sold per year in a given industry, a company whose sales were 5,000 of those units would have a ...

s, allocation of customers, allocation of territories, bid rigging, establishment of common sales agencies (

sales agents Sales are activities related to selling or the number of goods sold in a given targeted time period. The delivery of a service for a cost is also considered a sale. The seller, or the provider of the goods or services, completes a sale in r ...

), and the division of property or

profit Profit may refer to: Business and law * Profit (accounting), the difference between the purchase price and the costs of bringing to market * Profit (economics), normal profit and economic profit * Profit (real property), a nonpossessory intere ...

s or combination of these. The aim of such collusion is to increase individual member's profits by reducing competition.

Competition law Competition law is the field of law that promotes or seeks to maintain market competition by regulating anti-competitive conduct by companies. Competition law is implemented through public and private enforcement. It is also known as antitrust l ...

s forbid cartels. Identifying and breaking up cartels is an important part of competition policy in most countries, although proving the existence of a cartel is rarely easy, as firms are usually not so careless as to put agreements to

collude Collusion is a deceitful agreement or secret cooperation between two or more parties to limit open competition by deceiving, misleading or defrauding others of their legal right. Collusion is not always considered illegal. It can be used to att ...

on paper.

Historical background

Examples of alleged and legal cartels: * American Telephone & Telegraph (AT&T) controlled all telephone systems in the United States via a network of subsidiaries, the

Bell System The Bell System was a system of telecommunication companies, led by the Bell Telephone Company and later by the American Telephone and Telegraph Company (AT&T), that dominated the telephone services industry in North America for over one hundr ...

, which was broken up in 1982. *

De Beers De Beers Group is an international corporation that specializes in diamond mining, diamond exploitation, diamond retail, diamond trading and industrial diamond manufacturing sectors. The company is active in open-pit, large-scale alluvial and c ...

settled charges of price fixing in the diamond trade in the 2000s. (See

De Beers antitrust litigation The De Beers diamonds antitrust class action sought to end an alleged 60-year conspiracy to fix the price of rough diamonds in the U.S. by the De Beers group of companies. The litigation includes several cases including ''Hopkins v. De Beers Cente ...

Debate

The general debate with decartelization is a national economy controlled by monopolies and cartels, versus a free market economy. With a free market economy, the pros are very clear. It encourages individual initiatives; it determines price of goods through competition, and motivates people to work towards financial independence. Most individuals would prefer a free

market economy A market economy is an economic system in which the decisions regarding investment, production and distribution to the consumers are guided by the price signals created by the forces of supply and demand, where all suppliers and consumers ...

, where there are many buyers and sellers in each market, and the prices are determined based on competition alone. The problem is, it is not up to the individuals. In most cases of cartels, these secret arrangements are done "under the radar", and these major companies know how to cover their tracks. It is very difficult to prove that companies have formed a cartel; therefore it is very difficult to dismantle one. In the case with the Third Reich in Germany, the people had no choice. During the war, there was a school called , the "social conscience free market". Members of this school hated totalitarianism and had propounded their views at some risk during the Nazis' rule. Wrote Henry Wallich, "During the Nazi Reich period the school represented a kind of intellectual resistance movement, requiring great personal courage as well as independence of mind." The school's members believed in free markets, along with some slight degree of progression in the income tax system and government action to limit monopoly.

References

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External links

* http://eh.net/bookreviews/library/0934 * http://www.ushmm.org/wlc/article.php?lang=en&ModuleId=10005141 * https://books.google.com/books?id=bNa982ALww0C&pg=PA287&lpg=PA287&dq=decartelization&source=web&ots=H-l6keX60O&sig=phk9iVFEXfiRia__qz010KU_IXE&hl=en#PPA286,M1 Cartels Competition (economics) Monopoly (economics)