How corporate cartels quietly shape markets & prices

"Plata o plomo?", silver or lead?. The infamous phrase from Narcos defined the tactics of Colombian cartels, where compliance was incentivised, and defiance carried consequences. However, the concept of Cartelisation isn’t confined to just colombian crime syndicates. 

It can also emerge in corporate boardrooms, where market dominance becomes the primary objective. Instead of coercion, these corporate entities exert influence through strategic agreements, shaping industries to their advantage.

The methods may differ, but the goal remains the same, control over competition and the marketplace.

India’s advertising industry is now under the scanner for cartel-like behavior. The recent raids by the Competition Commission of India (CCI) on major advertising agencies, including WPP, Publicis Groupe, Madison, and Dentsu, have sent shockwaves through the sector. The allegations? Bid-rigging, price-fixing, and an industry-wide effort to sideline independent players, tactics that mirror classic Cartelisation strategies. If proven, these practices wouldn’t just violate fair trade principles but would indicate a systematic effort to manipulate India’s multi-billion-dollar advertising landscape in favor of a select few.

Dominant players across industries have repeatedly used anti-competitive tactics to gain power, from Big Tech's market manipulations to OPEC’s control over global oil prices. The advertising industry has seen similar scrutiny worldwide, such as the U.S. Department of Justice’s (DOJ) antitrust investigations into major ad agencies and the European Union’s crackdown on Google’s advertising dominance. India’s CCI raids now bring this global battle into a local context, forcing a reckoning within an industry that has long thrived under self-regulation and limited oversight.

Why is CCI cracking down?

The Competition Commission of India has been actively targeting cartel behavior as part of a strategy to promote market fairness and economic efficiency. Some key reasons for the recent aggressive stance include:

Consumer protection: Cartels force ordinary consumers to pay unjustifiably high prices, reducing affordability across essential sectors like housing, healthcare, and transportation in the case of. In the advertising industry, cartelisation can lead to inflated media buying costs, limiting access to affordable advertising for smaller businesses and startups. When major agencies engage in bid-rigging or price-fixing, brands are forced to pay higher rates for ad placements, driving up overall marketing expenses. 

Encouraging competition: Market dominance by a few players discourages new entrants, reducing innovation and slowing economic growth.

Alignment with global standards: India’s regulatory bodies are aligning with global antitrust frameworks, mirroring crackdowns seen in the US, EU, and Japan.

Economic growth goals: The Indian government is focused on creating an open and competitive business environment to attract foreign investment and boost GDP growth.

So what is a Cartel?

At its core, a cartel is a secret alliance among competitors seeking to control prices, limit production, or manipulate bidding processes, ensuring that competition remains artificial. The Competition Act, 2002 defines a cartel as an association of producers, sellers, distributors, traders, or service providers who, through mutual agreements, distort free market conditions. The International Competition Network (ICN) simplifies this definition into three key elements:

• An agreement between businesses
• Among competitors in the same market
• To restrict competition and unfairly gain control

Cartelisation leads to higher consumer costs, reduced economic efficiency, and job losses. A report estimates that price-fixing cartels lead to an overcharge of 10-20% on goods and services, directly impacting household expenses and corporate procurement costs. In India, Cartelisation in the cement, beer, and airline industries has cost consumers thousands of crores annually, raising infrastructure and living expenses.

Cartels manifest in various ways, including price-fixing, bid-rigging, output restrictions, and market allocations. These tactics insulate businesses from the pressures of competition, ensuring higher profits for a few while consumers and smaller players suffer from artificially inflated prices and restricted choices. Let us understand these tactics.

• Price-fixing: Price-fixing, one of the most common cartel practices, has devastating economic effects. When companies agree to keep prices artificially high, consumers are left with fewer choices and inflated costs. For instance, in the Indian cement cartel case, artificially elevated cement prices led to increased construction costs, affecting everything from housing projects to government infrastructure plans.
• Bid-rigging: Competing firms collude during the bidding process to ensure contracts are awarded to predetermined companies, creating the illusion of fair competition while eliminating genuine market dynamics.
• Output restrictions: Companies deliberately limit the supply of goods or services, creating artificial scarcity that drives up prices and maximises profits for cartel members.
• Market allocation: Competitors divide markets among themselves, by geography, customer base, or product type, restricting competition, reducing consumer choice, and preventing new players from entering the market.

These practices not only shield cartel members from competitive pressures but also stifle innovation, block market access for smaller businesses, and burden consumers with higher costs, ultimately weakening economic growth and fair trade.

The beginnings 

One of the earliest recorded cases of corporate Cartelisation was the Standard Oil monopoly in the early 20th century, where John D. Rockefeller’s company used aggressive pricing strategies to crush competition. The Sherman Antitrust Act (1890) was introduced in the U.S. to break up such monopolistic practices. Another historic example is the De Beers diamond monopoly, which controlled diamond supply globally for over a century, artificially inflating prices and restricting access to new market entrants.

The LIBOR scandal (2012) further exposed the Cartelisation within the financial sector, where top global banks colluded to manipulate interest rates, affecting trillions of dollars in loans and mortgages worldwide. These cases are examples of how cartels can persist for decades before being exposed and dismantled.

Famous cartel cases

The Beer Cartel in India- In 2021, CCI fined top beer manufacturers, United Breweries, Carlsberg India, and Anheuser-Busch InBev India, Rs 873 crore for colluding to fix prices and limit production. This scandal exposed how companies used trade associations to coordinate price hikes while misleading regulators.

The Cement Cartel in India- In 2012, CCI imposed a Rs 6,307 crore penalty on major cement companies, including ACC, Ambuja Cements, UltraTech, and Shree Cement, for price-fixing. The companies coordinated production schedules and market allocations to keep cement prices artificially high, limiting consumer choice.

OPEC- The Organisation of Petroleum Exporting Countries (OPEC) has long been the world’s most infamous cartel. By controlling global oil production and supply, OPEC manipulates prices, impacting economies worldwide. Despite repeated calls for breaking its influence, OPEC remains a dominant force in energy markets.

The European Truck Cartel- In 2016, the European Commission fined major truck manufacturers, including Daimler, Volvo/Renault, MAN, Iveco, and DAF, a record €2.93 billion for a 14-year-long cartel. These companies colluded on truck pricing and emissions compliance, limiting fair competition.

Certain industries are particularly prone to cartelisation due to factors such as high market concentration, barriers to entry, and the homogeneous nature of products or services. The construction and infrastructure sector frequently sees bid-rigging and price-fixing, especially in large public projects where a few dominant firms manipulate tenders.

The pharmaceutical industry has a history of price-fixing and supply restrictions, with major drug manufacturers often colluding to keep prices high and delay the entry of generics. The energy sector, particularly oil and gas, is notorious for cartel behavior, with OPEC being a prime example of coordinated production controls to influence global prices.

The cement and steel industries are also known for collusion, as limited competition allows companies to manipulate supply and pricing. The technology sector, especially digital advertising and software, has seen allegations of market allocation and monopolistic practices by large corporations. Additionally, the financial sector, including banking and credit markets, has been implicated in cartel-like activities such as interest rate manipulation, as seen in the LIBOR scandal. These industries, due to their structure and economic significance, remain under close scrutiny by regulators worldwide

Can corporate cartels be dismantled?

The long-term success of these crackdowns will depend on how effectively authorities enforce regulations, penalise offenders, and protect whistleblowers willing to expose anti-competitive practices. Strengthening legal frameworks, closing loopholes, and adopting advanced detection methods will be essential in preventing cartel behavior from resurfacing under different guises.

Breaking corporate cartels is not just the responsibility of regulators, it requires businesses to adopt ethical practices, policymakers to enact stronger laws, and consumers to remain informed and vigilant. Global cooperation and stricter international regulations will also play a critical role in preventing cross-border collusion and price manipulation.

And yet, cartelisation is far from an isolated issue. In Japan, Dentsu was caught rigging contracts for the Tokyo Olympics. In South Korea, Samsung’s advertising deals were tangled with political power. In Indonesia, agencies inflated advertising budgets to drain public money into private pockets. In Europe, secret rebates quietly funneled money away from brands as kickbacks. In Austria, political ad funds shaped media coverage, turning news into a product for sale. And in the United States, Cambridge Analytica blurred the lines between politics and advertising while simultaneously compromising the data of millions, showing the world just how deeply intertwined they had become.

The fight against cartels is not just about fair markets, it is about the integrity of economies, the accountability of corporations, and the trust of the people. And as history has shown, the real question isn’t whether cartels exist. It’s how long before the next one is exposed.