CARTOLLO. - A *cartello* (or consortium) is an agreement among industrial enterprises in the same branch of production for the purpose of regulating the market. It differs from other forms of industrial coalition (such as merger or absorption by the dominant enterprise in a given production sector of part or all of the other enterprises in that sector) in that the enterprises forming the latter lose their autonomy. The continued differentiation of individual enterprises within the *cartello*, however, gives rise to particular legal problems and is of considerable economic interest. Individual enterprises, for example, anticipating that the *cartello* may dissolve, continue to act, in whatever ways possible, by engaging in competition within the *cartello* itself to secure advantageous positions for when competition resumes in the market. For this reason, and because of the imbalance in the productivity of participating enterprises—which is accentuated by fluctuations in demand—the *cartello* is one of the most unstable forms of coalition. In sectors where the tendency toward coalition is further reinforced by other factors (such as integration of plants, specialization or standardization of production, etc.), it is destined to give way to more stable forms of coalition.
The legal organization of a *cartello* can vary widely: from a written agreement to the establishment of a commercial company, and even to the *open price* system, in which no written agreement exists and members merely periodically transmit data on their economic activity to a central office. The direction of the *cartello* may be entrusted to one of its members, a bank, or a collective body of enterprises whose decisions may be made by majority vote or must be unanimous. Only in the latter case do weaker enterprises have a real opportunity to defend their positions within the *cartello*, which, however, the economic power of the stronger enterprises may render quite unstable. In other cases, the predominance of the stronger enterprises reinforces the tendency toward more complex forms of coalition.
*Cartelli* can be classified according to various criteria. Several types of *cartelli* have been examined, distinguished by the intensity of their agreements and the form of their direction. Another distinction can be based on the methods by which the *cartello* achieves its characteristic goal: price stabilization, division of sales territories, or determination of maximum production quotas for each enterprise. Each distinction primarily serves the purpose of clarity in exposition, since in reality the phenomenon presents a complexity that theory must necessarily break down into its individual elements. The very distinction between *cartelli* and other forms of coalition that pursue different ends (integration, specialization, standardization of production—in short, greater efficiency of enterprises) loses much of its importance when one considers that in practice coalitions aimed at influencing prices by limiting competition generally bring about connections that serve the second set of goals as well. Thus, the existence of a *cartello* may facilitate agreements among enterprises in a given production sector for the purchase of raw materials, the shared use of energy, the establishment of joint offices or departments, advertising, and may encourage the trend toward more complex integrations. Conversely, coalitions that enable an enterprise in a given economic sector to achieve greater efficiency and larger scale strengthen the monopolistic power of the enterprise, leading to price formation phenomena similar to those caused by *price leadership*, etc.
A distinction that corresponds to a clear concrete differentiation is that between voluntary and compulsory *cartelli*. In agriculture, for example, cooperation among producers to support prices or for the joint purchase of seeds, fertilizers, and production tools was deemed necessary by many governments to overcome the inferior position in which this sector found itself following industrial development. The consortium among agricultural producers was thus made compulsory in many cases.
*Cartelli* began to take hold in America in the second half of the 19th century, favored by the severe depression that struck the American economy around 1872. Large complexes emerged that concentrated production in oil, steel, coal, gas, and sugar. Financially powerful bodies, more or less interconnected, inevitably came to control an ever-expanding sector of economic activity and to dominate political life. Indeed, it was not until the Sherman Act (1890) that attempts were made in the United States to prohibit cooperation among producers aimed at influencing prices. The trend, however, continued in other forms and ultimately prevailed. In Europe, too, *cartelli* spread rapidly, especially in Germany.
Price formation in a market dominated by a single *cartello* that controls a significant share of total supply resembles price formation under monopoly conditions. Naturally, the monopolistic power—which depends on the exercise of both demand and residual supply (i.e., the supply of non-member enterprises and those that could enter the market)—is weaker in the case of *cartelli* that do not control all supply and do not achieve, through the coordination mentioned earlier, greater efficiency among member enterprises. In such cases, non-member enterprises are able to mount effective competition against the *cartello*. The very tendency that leads to the formation of the *cartello* thus drives member enterprises toward more intensive linkages. When the *cartello* dissolves, an imperfect monopoly regime gives way to an oligopoly regime: competition among the large enterprises that were previously part of the *cartello* will likely take the form of economic struggle that either leads to more intensive linkages among the enterprises themselves or results in the survival of a single monopolistic enterprise.
Price formation in a market dominated by a single *cartello* (a highly plausible scenario, for example, in a global market) is analogous to price formation under oligopoly conditions. In this case as well, competition from non-participating enterprises and potential competition weaken the power of the *cartello*. The monopolistic power is naturally greater in the case of compulsory consortia that control the entire supply and are not subject to potential competition.
It cannot be denied, contrary to the opinion of Pantaleoni, that the spread of *cartelli* responds to needs that are anything but pathological in the development of the economic system. The moral judgment that must be passed on the phenomenon is therefore evident. It poses new problems for economic policy, which should not oppose the tendency toward business coalitions but should instead create conditions under which such coalitions, rather than aggravating the pretense of determining economic and political forces, offer the greatest possibilities for the development of the human person. State interventions aimed at achieving this objective will take different forms depending on the economic power of the *cartello*, the possibility of ensuring—through indirect measures—that its activity operates within the general directives of economic policy, and the usefulness that direct management of the *cartello* may have for the purpose of overall coordination of economic activity. Catholic theology considers *cartelli* not illicit when the means employed remain within the proper bounds of justice, since *cartelli* can bring about numerous advantages, especially in
The marketing of goods and in prices; but it demands that these be kept within due bounds both in their implementation and oversight, since they easily provide occasion for bankruptcies, excessive prices, and corruption.