Businesses that collude rather than compete are silently stealing from consumers and businesses because they inflate prices and reduce choices. This undermines efficient functioning of affected Australian markets.
The damage caused by cartels can include:
Higher prices for consumers and businesses
Because cartels artificially inflate input and capital costs along the entire supply chain, they cause businesses and their customers to pay more than they should for products. Capital items like the cost of buildings and equipment also cost more. This leads to higher operating costs in areas of rent, interest and opportunity costs over the life of the asset.
Lack of innovation
While protecting their own inefficient members, cartels stifle innovation and investment in research and development.
Less choice
While protecting their own inefficient members, cartels can reduce the choice of products and services available to consumers.
Lack of investment
Cartels typically attempt to block the entry of new players into their industry in order to defend market position. In the long term this can reduce investment opportunities, economic growth and jobs.
Locking up of resources
Cartels interfere with normal supply and demand forces, and can effectively lock out other operators from access to resources and distribution channels.
Destroying other businesses
Cartels can put honest and well-run companies out of business by controlling markets and restricting goods and services.
Negative customer sentiment
Cartel activity can damage consumer confidence in an entire industry sector, and this mistrust may extend to law-abiding businesses that are not involved in cartel conduct.
Higher taxes and reduced services
Cartels that target the public sector extract extra costs that are paid by all consumers through rates and taxes.
Less infrastructure
Bid rigging in public infrastructure projects can inflate costs, which ultimately reduces the capacity of the public sector to invest in projects that benefit our community.
