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

Keep scrolling for more

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

President Donald Trump has repeatedly called on Saudi Arabia, as the de facto leader of the OPEC oil cartel, to lower prices so that Americans see cheaper fuel costs. Donna Abdulaziz, WSJ, "Saudi Arabia Plans More Spending to Boost Sluggish Growth," 30 Sep. 2018 Causes of the surge include a decade-long crackdown on drug cartels, which has caused gangs to fragment and diversify into new areas. Ciara Nugent, Time, "Your Complete Guide to Mexico's 2018 Elections," 29 June 2018 Tens of thousands of parents and children, mostly from Honduras, El Salvador and Guatemala, have been caught crossing the U.S.-Mexico border illegally in recent years with stories of fleeing drug cartels, extreme poverty and gang violence. Anne Flaherty, Anchorage Daily News, "The immigration crisis: How we got here and what’s next," 19 June 2018 The answer lies squarely with early studio owners—namely the Edison Trust cartel—who feared that notoriety would embolden actors to demand more money. Margaret Heidenry, HWD, "Introducing Florence Lawrence, Hollywood’s Forgotten First Movie Star," 25 May 2018 Meanwhile, Deutsche Bank is one of the financial institutions set to be prosecuted on criminal cartel charges in Australia—the others are ANZ and Citigroup. Alan Murray, Fortune, "Trade War, Italian Populism, Spanish Socialism: CEO Daily for June 1, 2018," 1 June 2018 David Oyelowo stars in this comedy about an ordinary guy caught up in a deadly mix of drug cartels and unscrupulous businessmen and women. Willie Brown, San Francisco Chronicle, "Tweets of terror: Trump is getting busy at the chopping block," 17 Mar. 2018 Since the crackdown on cartels began, many important drug kingpins have been arrested, leaving gangs to fight among themselves and fragment. Ciara Nugent, Time, "Mexico Is Suffering Its Bloodiest Year in Modern History. Here's Why," 28 June 2018 In some of its most graphic scenes, the book depicts a series of bloody wars between crime cartels and of several extrajudicial killings perpetrated by off-duty police officers. Bruno Garcez, San Francisco Chronicle, "‘The Third Bank of the River,’ by Chris Feliciano Arnold," 14 June 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.

See More

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

Keep scrolling for more

Learn More about cartel

Statistics for cartel

Last Updated

15 Nov 2018

Look-up Popularity

Time Traveler for cartel

The first known use of cartel was in 1692

See more words from the same year

Keep scrolling for more

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

Keep scrolling for more

Comments on cartel

What made you want to look up cartel? Please tell us where you read or heard it (including the quote, if possible).

WORD OF THE DAY

full of whispering sounds

Get Word of the Day daily email!

Test Your Vocabulary

Difficult Vocab Quiz

  • the-education-of-achilles-eugne-delacroix
  • Which is a synonym of discomfit?
Spell It

Can you spell these 10 commonly misspelled words?

TAKE THE QUIZ
Add Diction

Test Your Knowledge - and learn some interesting things along the way.

TAKE THE QUIZ

Love words? Need even more definitions?

Subscribe to America's largest dictionary and get thousands more definitions and advanced search—ad free!