Output restrictions

An output control is an agreement between competitors to prevent, restrict or limit the volume or type of particular goods or services available in the market, through production or sales quotas.

The aim is to protect inefficient suppliers by creating scarcity in order to either increase prices or stop prices from falling.

Any business may independently decide to reduce output to respond to market demand. What is prohibited is an agreement with competitors on the coordinated restriction of output.

Generally, the action needs the support of key market participants to achieve the cartel’s desired result.

Impacts

By reducing the available supply of particular goods or services, cartel participants artificially increase the demand for the product, and so increase the price.

This leads to less choice and higher prices for consumers and businesses.