What is a cartel?
An overview of how a cartel is defined and the penalties you and your business could face if it trades in one
A business cartel is a group of businesses working together to increase their profits. This includes:
- Price fixing - two or more competing businesses directly or indirectly fixing prices.
- Output quotas - limiting or preventing supply or production between competing businesses.
- Market sharing - dividing up customers or prospective customers between competing businesses. This is where two or more businesses agree not to poach each other's customers or compete against each other in certain areas.
- Bid rigging - an agreement between businesses as to whether or not to bid for certain tenders eg an agreement that one or more of them will not bid or that one will put in an falsely high price so another business can win the contract.
These agreements may be written or verbal and don't need to be formal for the law to apply. Cartels are illegal under both civil and criminal law.
Consequences
If your business is found to be a member of a cartel, it could be fined up to 10 per cent of its turnover. In some cases, a person within your business could receive an unlimited fine or a prison sentence of up to five years. Company directors may be disqualified from acting as a director for up to 15 years.
Third parties - including competitors, customers and consumers - can also bring damages claims against the business.
However, if a business ends its involvement in a cartel and informs the Competition and Markets Authority (CMA), it may be granted protection or a reduced financial penalty. Its employees may also qualify for protection from prosecution and from director disqualification. See report a business cartel and leniency for cartel information.