cartel

noun
car·​tel | \ kär-ˈtel How to pronounce cartel (audio) \

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?

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.

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.

Examples of cartel in a Sentence

a cartel of oil-producing nations that controls production and influences prices
Recent Examples on the Web One projection, which assumes the virus outbreak will be severe and last six months, suggests the market would be oversupplied by 1 million barrels a day in the second quarter if the cartel and its allies fail to act, the OPEC officials said. Summer Said, WSJ, "OPEC, Allies Weigh Deeper Oil Production Cuts to Counter Coronavirus’s Impact," 4 Feb. 2020 Urapan has seen episodes of grisly murder linked to drug cartels in the past. Aj Willingham, CNN, "5 things to know for February 5: State of the Union, Iowa, coronavirus, Mexico, nukes," 5 Feb. 2020 The violence erupted in the western Mexican city of Uruapan, located in the state of Michoacan, a hotbed of violence linked to drug cartels. Zachary Halaschak, Washington Examiner, "Nine dead in Mexican arcade shooting," 4 Feb. 2020 After bonding with the man, the CIA informs the actor the billionaire is actually a drug cartel kingpin who has kidnapped the daughter of a Mexican presidential nominee. Aaron Couch, The Hollywood Reporter, "Nicolas Cage's 'The Unbearable Weight of Massive Talent' Sets Spring 2021 Release," 3 Feb. 2020 Cummins’ fourth novel is a fictional work that tells the story of a mother who flees Mexico for the United States with her son after her family is targeted by the powerful leader of her country’s most powerful drug cartel. Ineye Komonibo, refinery29.com, "Oprah Tactfully Responds To American Dirt Controversy," 28 Jan. 2020 Esperanza Azteca was founded in 2011 to promote music amid underprivileged young people in Juárez where such children are too often at the reach of drug cartels who recruit them with promises of quick, easy money. Alfredo Corchado, Dallas News, "Choirs unite in song to bring North Texas and the borderlands closer together," 17 Jan. 2020 In the German case, a federal cartel agency sided against the IOC’s argument that retaining exclusive rights for its top-tier sponsors protected the value of deals that help fund sports and athletes globally. Graham Dunbar, BostonGlobe.com, "IOC sets rules on protests for Tokyo: No taking a knee, no political hand gestures," 9 Jan. 2020 Deeper production cuts by the cartel and other major producers including Russia won't be enough to prevent a global supply glut, the International Energy Agency said Thursday. Hanna Ziady, CNN, "OPEC's plan to boost oil prices may not work," 12 Dec. 2019

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 entry 1

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Time Traveler for cartel

Time Traveler

The first known use of cartel was in 1692

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Statistics for cartel

Last Updated

22 Feb 2020

Cite this Entry

“Cartel.” Merriam-Webster.com Dictionary, Merriam-Webster, https://www.merriam-webster.com/dictionary/cartel. Accessed 24 Feb. 2020.

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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
How to pronounce cartel (audio)

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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