Cartels and Price Fixing Explained
When competitors secretly agree on prices, consumers pay more. That is why it is illegal in most countries.
By Felix Narayan | Oct 1, 2026 | 6 min
A cartel is a group of firms that coordinate to restrict competition, usually by fixing prices, sharing markets, or limiting output.
Competition authorities around the world investigate and fine cartels.
I Types of cartel behaviour
- — Price fixing
- — Bid rigging in tenders
- — Market sharing by region or customer
- — Output restrictions
II Why cartels are unstable
Each member has an incentive to cheat by undercutting the agreed price to win more business. This makes cartels hard to sustain without monitoring.
III Leniency programmes
Many authorities offer reduced penalties to the first firm that reports a cartel. This creates a “race to confess” that helps break cartels.
IV Legal cartels
Some international producer groups, such as OPEC for oil, coordinate output openly between countries. See our oligopoly guide.
V Signs of collusion
Competition authorities look for warning signs such as identical price changes by competitors at the same time, bids that rotate predictably between firms in tenders, unusually stable market shares, and firms refusing to compete in each other’s areas. Not all parallel pricing is illegal — firms may simply react to the same costs — but explicit agreements to coordinate are.
This is general educational information about economics, not financial, investment, or tax advice. Consult a qualified, licensed professional before making financial decisions.
Further reading
- 1. Natural Monopolies: Why Some Markets Have Only One Supplier
- 2. Monopoly, Oligopoly, and Competition: How Market Structure Affects Prices
- 3. Barriers to Entry: Why New Competitors Struggle