Cartel Regulation in Developing Countries

This paper was first presented by LLM scholar Lozindaba at the 7th Annual Competition and Economic Regulation (ACER) week in Salima, Malawi, co-hosted by the Centre for Competition, Regulation and Economic Development (CCRED)

Cartels have been described as the ‘supreme evil of antitrust’ and they are considered the most egregious violations of competition law. A cartel is an association of independent manufacturers or suppliers which aims at maintaining high prices and restricting competition. These objects are achieved through agreements to fix prices, to limit production to a certain amount or quality, or to share markets or customers between the participants in the cartel.

Cartels pose a serious threat to the very objectives of competition law as they interfere with the competitive process. Instead of engaging in fair competition and basing prices on market forces, cartelists depend on agreements with one another. The incentive to minimise costs of production or innovate is reduced. Consumers are harmed as prices are raised to levels not in tandem with market forces and supply may be restricted, thereby making goods either scarce and unnecessarily expensive, or completely unavailable for certain consumers.

In light of the serious effects of cartels on the competitive economy and consumer welfare, cartel regulation is one of the cardinal goals of every competition regulatory system. Competition authorities must ensure that they put in place robust systems for keeping cartels in check.

In Malawi, particularly, cartels thrive as there is insufficient deterrence of such conduct.

Read the full paper here.