cartel

noun
car·tel | \ kär-ˈtel \

Definition of cartel 

1 : a written agreement between belligerent nations

2 : a combination of independent commercial or industrial enterprises designed to limit competition or fix prices illegal drug cartels

3 : a combination of political groups for common action

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Did You Know?

The literal meaning of Italian cartello, a derivative of carta, “leaf of paper,” is “placard.” The word is also used for a letter of defiance or a challenge. In this sense the Italian word was borrowed into Middle French as cartel, and the French word was borrowed into English. In English, a cartel was originally a letter of defiance. Later the word came to be used for a written agreement between warring nations to regulate such matters as the treatment and exchange of prisoners. Another type of agreement, a combination of commercial enterprises, is now called a cartel.

Did You Know?

A cartel is an organization of a few independent producers for the purpose of improving the profitability of the firms involved. This usually involves some restriction of output, control of price, and allocation of market shares. Members of a cartel generally maintain their separate identities and financial independence while engaging in cooperative policies. Cartels can either be domestic or international. Because cartels restrict competition and result in higher prices for consumers, they are outlawed in some countries. The only industry operating in the U.S. with a blanket exemption from the antitrust laws is major-league baseball.

Examples of cartel in a Sentence

a cartel of oil-producing nations that controls production and influences prices

Recent Examples on the Web

The cartel last week announced that its members and allies would raise output by 1 million barrels a day, a boost that will come mostly from Saudi Arabia. Jaclyn Gallucci, Fortune, "One Casualty of Trump's Tough Iran Stance? Gas Prices," 28 June 2018 In the middle of the drug war the CIA sends Matt Graver (Brolin) to team up with former undercover operative Alejandro Gilick (del Toro) to kidnap the daughter of a drug lord, a false flag operation designed to incite rival cartels. Ariston Anderson, The Hollywood Reporter, "Ischia Global Festival to Open With 'Sicario: Day of the Soldado'," 26 June 2018 Trump has been calling publicly for the cartel to help lower prices by producing more. Kiyoko Metzler, courant.com, "OPEC agrees to pump more oil but crude prices jump anyway," 22 June 2018 The leaders of the NCAA and the schools have always believed that if the courts got close enough to opening up the athlete labor market that Congress would swoop in and save the cartel with an antitrust exemption. Andy Staples, SI.com, "How Matt Campbell and Iowa State Move Forward Without the Element of Surprise," 14 May 2018 Authorities say the arrest of Francisco Quiroz-Zamora provides a window into how the powerful Sinaloa cartel moves drugs from Mexico to the United States. Katie Zezima, chicagotribune.com, "Suspected drug kingpin charged with trafficking enough fentanyl to kill 10 million people," 27 Mar. 2018 The powerful Mexican Sinaloa cartel also uses them, according to investigators. Kristina Davis, sandiegouniontribune.com, "FBI bust aims to shut drug traffickers out of their super-encrypted communication networks," 15 Mar. 2018 El Chapo’’ Guzmán, the former leader of the Sinaloa cartel who was extradited to the United States last year. BostonGlobe.com, "Trump officials study death penalty for drug dealers in opioid epidemic," 10 Mar. 2018 In the face of rising global oil prices, members of the OPEC cartel and a few non-members including Russia agreed last month to ease production caps that had contributed to the run-up in prices. David Koenig, chicagotribune.com, "U.S. soon to surpass Saudis, Russia as top oil producer," 11 July 2018

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'cartel.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

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First Known Use of cartel

1692, in the meaning defined at sense 1

History and Etymology for cartel

French, letter of defiance, from Old Italian cartello, literally, placard, from carta leaf of paper — more at card

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Statistics for cartel

Last Updated

6 Sep 2018

Look-up Popularity

Time Traveler for cartel

The first known use of cartel was in 1692

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More Definitions for cartel

cartel

noun

Financial Definition of cartel

What It Is

A cartel is a group of companies, countries or other entities that agree to work together to influence market prices by controlling the production and sale of a particular product.

How It Works

Cartels tend to spring from oligopolistic industries, where a few companies or countries generate the entire supply of a product. This small production base means that each producer must evaluate its rivals' potential reactions to certain business decisions. When oligopolies compete on price, for example, they tend to drive the product's price throughout the entire industry down to the cost of production, thereby lowering profits for all producers in the oligopoly. These circumstances give oligopolies strong incentive to collude in order to maximize their joint profit.

Members of a cartel generally agree to avoid various competitive practices, especially price reductions. Members also often agree on production quotas to keep supply levels down and prices up. These agreements may be formal or they may consist of simple recognition that competitive behavior would be harmful to the industry.

Ironically, each member of a cartel has an economic incentive to cheat on any collusive agreements that are reached. For example, some companies or countries may choose to cheat on production quotas -- thereby enabling them to sell more of a particular product at higher prices (prices that are, of course, driven artificially higher when other members adhere to the agreed-upon production quotas). Another way members often cheat on the cartel is to lower prices. An undetected price cut will help a company to attract customers who are buying from the other members, as well as customers who are not buying the product at all. Some of these price adjustments may be subtle, including better credit terms, faster delivery, or related free services.

Cartels have less control than monopolies, where only one company or country manipulates supply. For this reason, prices in oligopolistic industries are generally not as high as they would be at the monopolistic level. However, prices are usually well above those that exist in purely competitive markets.

Why It Matters

Federal antitrust laws, most notably the Sherman Act, make cartels and collusive activity illegal in the United States. One of the world's best-known cartels is the Organization of Petroleum Exporting Countries (OPEC).

Cartels are most effective when the demand for the cartel's product is not very price sensitive. This is why cartels are more effective in the short term; over the long term, prices often become elastic as consumers find cheaper substitutes for the product. Also, demand volatility usually leads to disagreements within cartels regarding limits on output and capacity. In addition, the incentive for equity fund members to cheat on their agreements is often high, and this can lead to further disputes and difficulties maintaining cartel unity.

Cartels also do not last long in industries with low barriers to entry. In these types of industries, the threat of potential rivals generally reduces the gains to be had from collusive behavior. Although new producers may join a cartel, when membership levels increase, this often makes communication, negotiation, and enforcement more difficult.

Source: Investing Answers

cartel

noun

English Language Learners Definition of cartel

: a group of businesses that agree to fix prices so they all will make more money

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