Case study on cartel syndicate

A cartel or syndicate is a informal agreement among competing firms. It is a formal organization of producers and manufacturers that agree to fix prices, marketing, and production. Cartels usually occur in an oligopolistic industry, where there are a small number of sellers and usually involve homogeneous products. Cartel members may agree on such matters as price fixing, total industry output, market shares, allocation of customers, allocation of territories, bid rigging, establishment of common sales agencies, and the division of profits or combination of these. The aim of such collusion is to increase individual members’ profits by reducing competition.

Govt. intervention Policy:

The govt. of a country generally Bangladesh govt. always take some preventive measure to control the cartel behavior among the firms to ensure the consumer well being of a society. The policies can be-      

Regulatory policy:

  1. Monitoring the market Place:

The central govt. of Bangladesh try to focus on market monitoring activity to control the unrest cartel behavior the govt. try to enforce through regulatory agency and legislative body.

  1. Set Market price::

Although it is not that much efficient in Bangladeshi market but also govt. try to focus on this tool Ex- the example can be Dhaka city corporation (DCC) set market price on behalf of the commerce ministry and providing to every market place inside the Dhaka city. And try to regulate through the enforcement agency to control the market. By implementing this strategy government can remove asymmetric information prevailing in the market.

  1. Fining Policy

Govt. regulatory policy always tries to use criminal enforcement tools to control the cartel behavior. Fining policy is the most important tools to control the market price. Like the mobile court conducted by commerce ministry sometimes efficient and identify those who are involved with syndication activity and punish them trough a fine amount.

      4. Creating the deterrence

Sometimes regulatory agencies and legislative organizations make a law that naturally prevents people from cartel behavior. Like as making laws through keep in mind that expected benefit should not be higher than fine policy. Ex- making a cartel will be punish by 10 yrs or taka 10, 00000 instead of getting taka 8, 00000 benefit.

  1. Encourage the consumer co operative policy

Govt. should encourage consumer to make a co operative association. By doing this consumer can collect their necessary goods and services from rural area .so they can lower their cost through co operative activity. So forming a co operative association makes consumer better off and cut the cartel power to raise price.

  1. Encourage Farmer co operative society

Govt. of Bangladesh can also influence the farmers to make an association of co operative society that helps them to transfer their produced goods and services from rural area to urban area like Karwan Bazaar etc. little farmers don’t have capital to reach their goods to urban area so that co operative society helps them to come forward in the market.

  1. Govt. direct Intervention Policy:

Gov. can directly intervene in market control policy to prevent the syndicate. Like BDR rice shop sell rice in open market to minimize the effect of price inflation and cartel behavior of firms.

      8. Anti trust Law:

 Anti trust law is the legislation enacted by the federal and various state governments to regulate trade and commerce by preventing unlawful restraints, price-fixing, and monopolies, to promote competition, and to encourage the production of quality goods and services at the lowest prices, with the primary goal of safeguarding public welfare by ensuring that consumer demands will be met by the manufacture and sale of goods at reasonable prices.

Antitrust law seeks to make businesses compete fairly. As we know that under a trust many firms join together and behave like a cartel and try to influence the market price. So anti trust law disband this trust into a single firm and try to cut their power to set price in tremendously worse situation.

Case study on cartel or syndicate