Decartelization is the transition of a national economy from

monopoly A monopoly (from Greek language, Greek and ) is a market in which one person or company is the only supplier of a particular good or service. A monopoly is characterized by a lack of economic Competition (economics), competition to produce ...

control by groups of large businesses, known as

cartel A cartel is a group of independent market participants who collaborate with each other as well as agreeing not to compete with each other in order to improve their profits and dominate the market. A cartel is an organization formed by producers ...

s, to a

free market In economics, a free market is an economic market (economics), system in which the prices of goods and services are determined by supply and demand expressed by sellers and buyers. Such markets, as modeled, operate without the intervention of ...

economy. This change rarely arises naturally, and is generally the result of regulation by a governing body with the authority to decide what structures are permissible. A modern example of decartelization is the economic restructuring of

Germany Germany, officially the Federal Republic of Germany, is a country in Central Europe. It lies between the Baltic Sea and the North Sea to the north and the Alps to the south. Its sixteen States of Germany, constituent states have a total popu ...

after the fall of the

Third Reich Nazi Germany, officially known as the German Reich and later the Greater German Reich, was the German state between 1933 and 1945, when Adolf Hitler and the Nazi Party controlled the country, transforming it into a totalitarian dictat ...

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 () is a market in which pricing control lies in the hands of a few sellers. As a result of their significant market power, firms in oligopolistic markets can influence prices through manipulating the supply function. Firms in ...

), where there are a small number of sellers, and usually involve homogeneous products (see

Homogeneity and heterogeneity Homogeneity and heterogeneity are concepts relating to the uniformity of a substance, process or image. A homogeneous feature is uniform in composition or character (i.e., color, shape, size, weight, height, distribution, texture, language, i ...

). Cartel members may agree on such matters as

price fixing Price fixing is an anticompetitive agreement between participants on the same side in a market to buy or sell a product, service, or commodity only at a fixed price, or maintain the market conditions such that the price is maintained at a given ...

, total

industry Industry may refer to: Economics * Industry (economics), a generally categorized branch of economic activity * Industry (manufacturing), a specific branch of economic activity, typically in factories with machinery * The wider industrial sector ...

output,

market share Market share is the percentage of the total revenue or sales in a Market (economics), 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 ...

s, allocation of customers, allocation of territories,

bid rigging Bid rigging is a fraudulent scheme in a procurement action which enables companies to submit non-competitive bids. It can be performed by corrupt officials, by firms in an orchestrated act of collusion, or by officials and firms acting together. ...

, establishment of common sales agencies ( sales agents), and the

division of property Division of property, also known as equitable distribution, is a division of property and debt between spouses when the marital relationship is ending. It may be done by agreement, through a property settlement, or by judicial decree. Distribut ...

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 inter ...

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 ...

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 on paper.

Historical background

Examples of alleged and legal cartels: *

American Telephone & Telegraph AT&T Corporation, an abbreviation for its former name, the American Telephone and Telegraph Company, was an American telecommunications company that provided voice, video, data, and Internet telecommunications and professional services to busi ...

(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 AT&T Corporation, American Telephone and Telegraph Company (AT&T), that dominated the telephone services industry in North America fo ...

, which was broken up in 1982. *

De Beers The De Beers Group is a South African–British corporation that specializes in the diamond industry, including mining, exploitation, retail, inscription, grading, trading and industrial diamond manufacturing. The company is active in open-pi ...

settled charges of price fixing in the diamond trade in the 2000s. (See De Beers antitrust litigation.)

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 Competition is a rivalry where two or more parties strive for a common goal which cannot be shared: where one's gain is the other's loss (an example of which is a zero-sum game). Competition can arise between entities such as organisms, indi ...

, 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. The major characteristic of a mark ...

, 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

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 Totalitarianism is a political system and a form of government that prohibits opposition from political parties, disregards and outlaws the political claims of individual and group opposition to the state, and completely controls the public s ...

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 An income tax is a tax imposed on individuals or entities (taxpayers) in respect of the income or profits earned by them (commonly called taxable income). Income tax generally is computed as the product of a tax rate times the taxable 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&dq=decartelization&pg=PA286 Cartels Competition (economics) Monopoly (economics)