“Competition is central to the operation of markets, and fosters innovation, productivity and growth, all of which create wealth and reduce poverty.” Competition is vital to many markets, and thus their economy. When manufacturers compete, they illustrate competitive prices and are motivated to demonstrate innovation and produce a product of higher quality as well as opening opportunities for the creation of jobs and new products to the market. However, sometimes individuals create a cartel in order to manipulate the market and the consumers to benefit solely the producers-they are essentially the polar opposite of competition. Cartels arise when a group of firms, or producers, decide to work together so that they may regulate the supply of a good or service and drive up the price. This eliminates any competition between manufacturers as they enter upon an agreement with one another and cooperate in terms of setting prices and restricting output. The individual firms work together and act as one firm, behaving similarly to a monopolist. The graph below illustrates how a cartel lowers output to raise the price and create a profit:

When the individuals in the cartel cooperate with one another and lower their quantity from Qc to Qo, the price rises from Pc to Po and the firms now reap the rewards of areas “1” and “3” as profit. In comparison, when there is no cartel and the firms are competitive with one another, the quantity will rise back to Qc, the price will lower to Pc, and the firms will profit areas “3” and “4”. When an individual participates in a cartel, they violate section 4 of the Competition Act 2002: “Section 4(1) prohibits and renders void "all agreements between undertakings, decisions by associations of undertakings and concerted practices which have as their object or effect the prevention, restriction or distortion of competition in trade in any goods or services in the State or in any part of the State". The Act lists some specific types of behaviour which are expressly prohibited. These include agreements which: * fix prices * limit or control production or markets * share markets or sources of supply * apply dissimilar conditions to equivalent transactions with other trading parties or attach supplementary obligations to a commercial contract which have nothing to do with the subject of the contract” There have been a couple amendments to the Competition Act 2002, but this section still stands. Cartels are illegal for a number of reasons: aside from the fact that through their cooperation, competition is eliminated (as stated earlier), cartels are unethical by manipulating and cheating consumers, they stunt economics growth, and they discourage innovation and new products to the market. When firms produce within a cartel, they have no motivation to create new and improved products; also, with barriers to entry discouraging other manufacturers from entering the market, new competitors cease to exist. Often times, small and individual businesses simply cannot compete with the bigger firms that have complete control of their product in the market, and so new products, better quality, and the creation of jobs will never become a reality. Not only do consumers pay the price of over-valued goods, but they also pay the price of little to no choice in the products they buy and aren’t offered products of a much higher quality at a reasonable price. The only individuals who benefit from a cartel are those on the producer end of the market-after eliminating any outside competition, taking control of the quantity produced and the price of a good, and generalizing the product sold, cartels may efficiently exploit customers to reap greater profits. From a government standpoint, the obvious reaction is to eliminate all cartels in order to promote economic growth, innovation and new product lines, and thus creating more jobs and improving the economic situation for everyone involved, not just the producers. And so the Competition Act was created and made to regulate the market and keep cartels from taking over a market. Given that cartels are illegal, many of them that are active become very secretive in order to avoid facing the consequences of breaking the law. So, it can prove to be very difficult trying to find cartels and charge the firms that participate in the illegal operation. So, they established the Leniency programme, which allowed an individual to turn in a substantial amount of credible evidence that would warrant an investigation or proof an infringement, and in turn be granted full immunity with regards to the prosecution of the firms involved. Due to the lack of success in independently finding and prosecuting cartels, this programme is used as a tool to expose the operations from the inside. The first of the two cartel cases that I will evaluate today is the Citroen Case. In 2009, Citroen Dealers Association, Duff Motors was charged for participation in a cartel with intentions of restricting competition in the market between 1997 and 2002. After the “Citroen Dealers Association” was established in 1995, dealerships were set up throughout Ireland, including the North/West, Dublin/Leinster, and South, and the positions of secretary, treasurer, and president were filled. Soon after the dealerships were up and running, the CDA developed a plan to fix prices that involved: (i) “The maximum permissible discounts offered by the retail dealers; (ii) The recommended price list for new vehicles; (iii) Delivery charges; (iv) Accessory prices; (v) The charge for metallic paint; (vi) Agreed prices offered for trade-ins and the sale of used stock; and (vii) Export prices and parts.”
The CDA would agree upon pricing for these goods and services, and the secretary that was previously mentioned would make sure the information regarding set prices was circulated to all parties involved. They did well to monitor their partners as well, using mysterious shoppers to ensure that all individuals were complying with the agreement made and the set prices were being used. If one of these mystery shoppers found that set prices were being ignored, the CDA would issue that party a fine to pay. After one individual was caught breaking the agreement and fined within the cartel, they approached the competition authority with the necessary statement and documents to launch an investigation and lead to the prosecution of Mr. Duffy and Duffy Motors (Newbridge) Ltd. The CDA was attempting to control dealerships around the country and exploit its customers for their own benefit. With regards to whether or not it resembles the characteristics of a classic cartel, it’s important to recall the main characteristics that define a cartel and why the government has placed such importance on finding, prosecuting, and destroying the parties involved. The characteristics defining a cartel reflect the management, intentions, and actions carried out within the market. When two or more parties collaborate to control the market, have intentions of controlling the market to drive up prices and maximize profit by artificially overpricing goods, and proceed to eliminate competition from the market, they are considered a cartel. All of these characteristics are demonstrated above-the CDA was compromised of dealerships all across Ireland who cooperated with one another to control the set price offered to the consumer. The administrators of the CDA monitored the other firms and ensured compliance or else issued a fine to the uncooperative dealerships, thus attempting to practice complete control over how the dealers operated, as if it was a monopoly. The reason the government has prioritized finding and destroying cartels is that they abuse their power in the market and by exploiting their customers and manipulating the market to leave no choice but to pay for overpriced items so that manufacturers will reap the profit. In the Case of CDA, a delivery charge was deconstructed and thought to overcharge in certain areas of the delivery process and this extra cash was kept as a profit- this sort of behavior is damaging to both the customer and the market. Due to the amount of similarities between a cartel and the CDA as well as the damaging effects to the automotive industry and all the customers that fell victim to the fixed overpricing of goods and services, I would classify the case as a cartel and agree that prosecution of the administration and other dealerships involved in the scheme is necessary.
The second case I will evaluate is that of the hedge cutting price fixing case. In 2011, John Joe McNicholas as John Joe McNicholas Plant Hire and Oliver Dixon as Oliver Dixon (Hedge Cutting and Plant Hire) Limited were found not guilty with regards to their case and the charges of entering into an anti-competitive agreement relating to a minimum tender price for an Irish rail hedge-cutting contract. In November of 2006, ten companies were allowed to bid on a contract provided by Irish Rail to remove vegetation in a certain area of the rail line. After receiving the varying bids, the Irish Rail called for a meeting with all the bidders they thought to be relevant to the project. Other firms that were present at the meeting with the Irish Rail brought the allegations against McNicholas and Dixon forth and they accused the two of attempting to set a fixed price on the bidding. The two were also said to have threatened non-cooperating firms with violence and the informality of the meeting resulted in a ‘handshake’ to confirm the scheme. A few days after this meeting took place, four of the firms withdrew their offers to the Irish Rail and explained to them their allegations against McNicholas and Dixon, and ultimately they received the job. They responded in defense by claiming these allegations were simply made up by the competitors so that they would be offered the contract. The problem in assessing this case is the lack of documentation and evidence of these events-the closest formality to a contract used was a handshake, which provided no evidence that McNicholas and Dixon ever attempted to fix the price of the tender. And, if all parties did in fact participate in this handshake agreement, then they too should be guilty as it’s against the law to simply enter into an agreement with intentions of fixing prices and manipulating the market. If the allegations remained to be true, then I would classify the case as a cartel since again, more than two companies would have entered into an agreement with the objective of fixing the tender price and collectively (and artificially) raising the value of their work. With that said, the lack of hard evidence in the case doesn’t necessarily allow the classification of this operation as a cartel. However, even in the case that the four accusers were making up the allegations, in an attempt to collaborate and drive out competition within the market could also be viewed as an attempt to create a cartel between the four of the remaining competitors.
In summary, the Citroen Car case absolutely represented a cartel. The way in which the scheme was operated as well as documentation providing evidence that price fixing was implemented in an attempt to exploit the customers and overprice their goods and services in order to obtain an easy profit was sufficient enough to allow the CDA to be classified as an operating cartel. However, in the second instance, a lack of evidence and therefore truth in the events that allegedly happened provide a challenge in classifying the case as a cartel. The allegations represent the making of a cartel, however they can not be confirmed to have actually happened. In regards to the paper as a whole, I do not agree with the first half of the statement, as I have stated the Citroen case resembles a cartel, and I believe there’s not enough validated evidence to accurately asses the second case.