Cartel theory is usually understood as the doctrine of economic cartels. However, since the concept of 'cartel' does not have to be limited to the field of the economy, doctrines on non-economic cartels are conceivable in principle. Such exist already in the form of the state cartel theory and the cartel party theory. For the pre-modern cartels, which existed as rules for tournaments, duels and court games or in the form of inter-state fairness agreements,[1] there was no scientific theory. Such has developed since the 1880s for the scope of the economy, driven by the need to understand and classify the mass emergence of entrepreneurial cartels. Within the economic cartel theory, one can distinguish a classical and a modern phase. The break between the two was set through the enforcement of a general cartel ban after Second World War by the US government.[2]
Cartel is an ambiguous concept, which usually refers to a combination or agreement between rivals, but – derived from this – also designates organized crime. The main use of ‘cartel’ is that of an anticompetitive association in the economy. In politics, it refers to a temporary alliance of several parties in election campaigns, for example. The scientific analysis of cartels is done by cartel theory.
In other languages, "cartel" might have different spellings. It is called Italian: cartello in Italian, German: kartell in German, Hungarian and Estonian, Dutch; Flemish: kartel in Dutch, Turkish and Slavic languages, Finnish: kartelli in Finnish, and Lithuanian: kartelis in Lithuanian. Even in the same languages, the spelling has varied over time. In German, for example, the spelling has gone back and forth between the c-initial form and the k-initial form.Nevertheless, "cartel" is the most widespread worldwide because of its use in English, Spanish, French and Portuguese.Though there is no difference in meaning between "cartel" with a "c" and "kartel" with a "k", they are not always interchangeable. Some institutions and organizations differ in name mainly in this letter, like the Kartellverband katholischer deutscher Studentenvereine and the Cartellverband der katholischen deutschen Studentenverbindungen, which are both umbrella organizations of Catholic student associations in Germany.
The word "cartel" has its root in the Greek χάρτης (= papyrus scroll, paper, map) and came about the Latin "charta" (see Magna Carta, the English medieval law), the Italian "cartello" (diminutive of carta = paper, map) and the French "cartel" into the English and German language.[3] In the Middle Ages, it designated an agreement on the fighting rules in the knightly tournament, then for duels. Until the 18th century, also the rules for noble games and courtly contests were named so. In modern times, especially in the 18th and 19th centuries, the term "cartel" was also used for intergovernmental agreements of technical kind: The guiding idea of a conflict confining clause came to light in various treaties between belligerent states, such as "cartels" on the postal and Trade or the treatment of couriers, prisoners of war and deserters. It is not until about 1880 that the term "cartel" also means the restriction of competition between entrepreneurs. Initially, this usage was only spread in the German speaking countries in Europe. Only by and by, this novel word meaning was imported into neighboring languages (either as "Kartell" or "cartel") and by this the economic aspect became the predominant meaning of "cartel". In the 19th and 20th century, also social associations or political alliances were referred to as cartels, so the union of German student fraternities or the cartel parties or in the German Empire. In Belgium of the 20th and 21st century, there was the same naming for party alliances, e.g. "Vlaams Kartel". At the beginning of the 20th century, the socialist thinker Karl Kautsky saw the possibility of even a cartel between states that would replace the imperialist competition of the great powers and establish a peaceful ultra-imperialism.[3]
The term ‘’cartel’’ is normally used in a specific context, resulting in a number of content variations. So there is:[3]
In addition, "cartel" or "Kartel" are used as names for distinct brands, business companies, music bands or works of art.
Cartels are not always easy to spot. To be able to reliably distinguish them as alliances between rivals from other forms of organization, the consideration of positive and negative indicators can be helpful.
Constituent criteria for cartels would be the following:
Exclusion criteria for cartels would be the following:
The origin of the usage of 'cartel' for entrepreneurial co-operations was the German speaking region of Central Europe. Already in the 1870, 'Cartell' came up for railway companies who unified their technical standards, pooled their stocks of railroad cars and coordinated their time schedules.[4]
In 1883, an explanatory framework was based upon this novel understanding of "cartel": the classic cartel theory, which was in the same way of German origin: The Austro-Hungarian professor of economics Friedrich Kleinwächter had condensed a number of case studies to the draft of an empirical theory.[5] Cartel theory remained for decades the product, above all, of Central European economists of German tongue. That approach was well-intentioned to the entrepreneurial cartels and in this respect was functionalist and institutionalist.[6] It had its origin in the historical school of economics. The classic cartel theory itself went through three stages of development:
Outside of the German speaking countries, there were more or less similar theories of economic organization. These variants existed until the 1920s (in Italy until after 1945). However, they operated with different basic terms such as (in French) "syndicat", "accaparement", (in Italian) "sindacati", (in English) "combination" or "trust". In France Francis Laur and Paul de Rousiers, in Italy Francesco Vito, in the USA Jeremiah Jenks and in the United Kingdom Henry W. Macrosty as well as David H. MacGregor were authoritative writers on economic combinations.
The modern cartel theory, which followed the classical cartel doctrine is essentially of American origin (George J. Stigler and George W. Stocking in the 1940s) It was based on the liberal view upon economy, which already had coined the traditional antitrust concept of the 1890s. The modern doctrine rejects cartels more or less fundamentally and is therefore not much interested in the internal organization of existing cartels, which are combated (and therefore only loosely institutionalized). Subsequently, modern cartel theory is quite oriented to pure economic theory and to economic policy.[7] The organizational-science aspects of the classical cartel theory did not find a continuation in modern cartel theory.
Modern cartel theory points out - much more committed than the classical one - to the detrimental consequences of a lack of competition that leads to overpricing, misallocation of capital and slowing down of technical progress in the economy. In this context, this doctrine has helped to develop the paradigm of market failure, which must be avoided by means of an appropriate competition policy. On the other hand, the disadvantages of unrestrained competition - such as unnecessary bulk goods transport, unnecessary advertising for mature goods, brand sales strategies - are highlighted in the classic cartel theory. Thus, these two directions of cartel studies feature conflicting, mutually exclusive economic concepts and neither of them can ideally solve the fundamental problem of entrepreneurial competition.
Terminologically, classical cartel theory has yielded sophisticated definitions and classifications of cartel types that were based on material institutional criteria. By contrast, modern cartel theory is essentially normative. Its specific terminology depends on the respective competition law, its national version of the cartel ban and exemptions for useful cartels.[8]
According to an analysis by Holm Arno Leonhardt, classical cartel theory can be understood (after a deconstructive adjustment) as an interdisciplinary systems theory in the field of the social sciences.[9] Abstracted from the concrete circumstances of the individual types of competition, an overarching theory of the social system 'cartel' emerges. Leonhardt defines this through nine basic statements on the factors arena, actors, interactions, structures, functions, equilibrium condition, driving forces, development path and system environment: Groups of independent, homogeneous actors are on certain arenas (action fields) on the way. Their egoism leads to competition and conflict. These are perceived as disturbing or threatening and lead to collusion on fairness rules and reconciliation of interests, e.g. by joint ventures. The adopted standards, agreements and projects need to be enforced and monitored, creating multi-stakeholder organizations – cartels. The equilibrium condition of the system is the win-win constellation: all members of a group want to benefit from it as well. The driving force that leads to cartel formation and successively condenses the associations on a development path to higher organizational forms is rationalization. The latter is only exhausted when an arena-wide organization has emerged and is fully developed, such as a trust corporation or a world state. In the economy this tendency is permanently suppressed by the competition policy of the state. There is no such instance in international relations, so that the world state perspective remains in force.