Cartels are (usually secret) agreements not to compete, through price-fixing or in other ways. They are regarded as very serious crimes in the UK as well as in many other countries. They lead to customers paying more (and often much more) than they should for their products. Companies can be fined very large amounts (up to 10% of annual turnover for each year of the cartel) and individual company executives can be fined or sent to jail. In addition, customers can seek damages.
UK cartel investigations are carried out under Chapter I of the 1998 Competition Act which closely mirrors Article 101 of the Treaty on the Functioning of the European Union (TFEU).
Competition Authorities (such as the OFT in the UK) generally offer leniency to the first cartel member to confess. This is a powerful deterrent because one cartel member can never be sure that other members will remain silent. One good example of such whistle-blowing led to British Airways being fined £121.5m by the OFT for fixing long-haul fuel surcharges, followed by a $300m (£148m) fine from the US Department of Justice for colluding over cargo and long-haul surcharges. BA was brought before the authorities after lawyers at Virgin Atlantic blew the whistle on conversations between senior figures at both airlines over the surcharges - a levy added to tickets to cover the rising cost of oil. Virgin escaped penalties because they broke the cartel by going to the authorities. It is interesting to note, however, that both Virgin and BA may be required to pay damages to customers as a result of class action law suits.
Another high profile cartel involved around 50 UK independent schools, including Eton College, Harrow and Westminster, who shared information about likely fee increases. This cartel was hardly secret and ceased as soon as the schools realised that their behaviour was illegal. They each then paid fines averaging £70,000 each. The schools also undertook to make separate voluntary contributions totalling £3m into a new charitable educational fund, in what the head teachers acknowledged was an "imaginative solution to a trying inquiry".
It is important to distinguish cartels from tacit collusion which happens when firms fail to reduce prices because they reckon that this would only cause their competitors to reduce their prices, so they would all be worse off. This important subject is discussed on the Market Studies and Investigations webpage.