Once tolerated, cartels are now hunted by the authorities

Hubert Buch-Hansen. Photo: Bjarke MacCarthy.

You’d like to install a new kitchen so you get in touch with various contractors to get a quote. It turns out that it will be more expensive than expected, regardless of who gives you a quote. This may be a case of collusion, also called a cartel agreement. These types of agreements exist in many branches. Businesses perhaps divide the market between them or fix prices. A common feature of the different types of cartel agreements is that they affect society as a whole, explains Hubert Buch-Hansen, associate professor at the Department of Business and Politics at CBS and the author of the book Cartels: – Unveiling collusion in Danish business and industry.

“The problem with cartels is that they overcharge. This affects not only your neighbour, but you, me and the public. Take for example the cartel that existed for many years between the manufacturers of plastic trays for vegetables, meats and other packaged grocery store items. My guess is that only a few Danes have heard of this cartel, but its existence meant that many people were overcharged for their food. Cartels exist in secret and I’ve written a book that puts them in the spotlight,” says Buch-Hansen.

Cartels have existed as far back as the Middle Ages, when traders restricted competition by working together in guilds. Cartels subsequently developed in a big way in the late 1800s and early 1900s with industrialisation, says Buch-Hansen:

“Nationwide cartels began to appear, with agreements between companies and industry in Denmark and its surrounding countries. As the financial system has become more global in recent decades, there are multiple examples of cartels that have done the same.”

In keeping with the development of cartels, efforts to restrict them have also evolved.

“A century ago Danish businesses and industry was rampant with cartels, but we’ve moved away from that. Throughout the 1900s there were no laws directly forbidding cartels. The authorities instead tried to control anti-competitive agreements. It was not until the end of the 1990s that a law was passed specifically forbidding agreements, which means that it’s only within the last twenty years that the authorities have seriously begun chasing down cartels,” he adds.

One of the reasons that the Danish authorities have begun to crack down on cartels is that especially EU legislation is moving in that direction. The authorities also now have an extensive number of tools at their disposal to break up cartels. For example, there is surveillance and tapping, and people involved in cartels can be hit with large fines or be sentenced to up to six years in prison,” explains Buch-Hansen.

“One thing is the size of the fine, but if a company is stamped with having been part of a cartel, it can damage its brand. This is the reason that companies take this issue very seriously. Danfoss, for instance, was fined 670 million kroner by the European Commission because of a subsidiary that had taken part in a cartel. Danfoss now has a number of policies to prevent something similar from happening again,” adds Buch-Hansen, continuing:

“It’s my impression that only a small minority of Danish businesses take part in cartels today. But some companies will always be willing to take the chance. This means that I can say with certainty that secret cartels still exist and will continue to do so.”

Please contact Hubert Buch-Hansen for questions, or read more about his book.