Cartel american business history

A group of companies banding together to control the price of goods or services by regulating the supply. By regulating the supply, they are able to control prices and quantity. Usually, the members of a cartel are the largest producers in the industry, which may otherwise have few other members of significance. More recently, the term shared monopoly has been used in place of cartel.

Cartels originated during the mercantilist age when several companies sharing the same interests banded together in order to control prices. During the early years of industrialization, cartels were common because there were not enough companies existing to provide competition in some industries. The first cartel of significance in the United States was the South Improvement Co., formed in 1871 by John D. Rockefeller’s Standard Oil Co. and other oil producers. The company successfully negotiated rebates with the RAILROADS that would lower their haulage costs while at the same time paying them a kickback from the fees paid by nonmembers of the company. When the new rates were accidentally posted before an announcement was made, many small oil producers discovered that their haulage rates had increased sharply and blamed the company for their plight. When the SHERMAN ACT was passed in 1890, cartels became illegal in the United States as they were considered to be organizations formed to restrain trade and fair competition. Other ANTITRUST laws, notably the CLAYTON ACT, also attempted to control cartel formation and behavior.

While antitrust laws forbid cartels in the United States, they do operate internationally, often controlling the supply and affecting prices of commodities. The best-known international cartel is OPEC (Organization of Petroleum Exporting Countries), a group of oil producers, mainly from the Middle East and Asia, that controls the output of oil from their countries. It is an example of a government-controlled cartel, organized to protect the prices and supply of the countries’ major export.

Further reading

• Geisst, Charles R. Monopolies in America. New York: Oxford University Press, 2000. 
• Wells, Wyatt. Antitrust and the Formation of the Postwar World. New York: Columbia University Press, 2002.