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Cartels in Oil

In: Business and Management

Submitted By Quinthintjes
Words 752
Pages 4
. Introduction
Since the existence of the European Union, the internal borders in Europe have faded or vanished. This enabled the development of a trade center in Europe. Consequently, the members of the EU are intensifying their business and compared with the pre-EU era, competitive behavior has reached its highest level. Unfortunately, some corporations turn to illegal activities in order to gain an advantage over other competitors. The results of these activities differ widely but their effects are always inhibiting for the competitive market. To counteract against these illegal activities, the European Commission (hereinafter the EC) investigates the European market thoroughly in order to maintain a competitive market across the EU. In recent years, the EC has intensified its anti-collusion behavior by charging fines of substantial amounts to companies who deliberately violated the rules and policies given by the EC. For example, in 1998, the European Commission fined ten companies with a total amount of ECU 92.21 million1 in the district heating industry and sentenced them for running a secret market-sharing, price-fixing and bid-rigging cartel for the pipes that were used in their constructions (European Commission, 1998). The action of the EC raises some interesting questions, as to whether the EC is justified to sentence companies for trading in the colluding way they did and whether the EC should be able to influence the trade in Europe by charging fines. This paper describes the effect on welfare that is caused by cartels and how the EC should respond to this.
Firstly, the case concerning the pre-insulated pipe industry and its cartel is discussed. Secondly, the economic impact of cartels on welfare and the trading market is examined. Finally, the strategy and sentence of the EC in this case is investigated and to summarize, a conclusion will be drawn....

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