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Fighting the Cartel

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Minina David

on 26 August 2014

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Transcript of Fighting the Cartel

Fighting the Cartel
Why is the oil cartel the best-known form of economic conspiracy?
Because of the widespread attention given to the activities of the Organization of Petroleum Exporting Countries (OPEC).
"Your wish is my command.“
OPEC cartel was formed in reaction to this drop in payments, that is, to protect its vested interest.

Was there a rice cartel in the Philippines?
What is Cartel?
A group of businesses that agree to fix prices so they will make more money (MWD)
A cartel is either an informal group or a highly organized one formed by producers whose purpose is either to allocate market shares, control production or regulate prices
In the Philippine experience, a cartel can happen in the importation of oil and sugar, in the banking industries, and even in the buying and selling of basic staple food like rice.

What is Oligopoly?
It is a market situation, where agreements among competitors often raise antitrust suspicions, although not all relationships between competitors are illegal.

Certain activities do restrict competition and are generally illegal, and in those cases corporate social responsibility means alerting managers and employees to the practices that may violate antitrust law through unfair competition.

How does the oil cartel work against social welfare?
- non-OPEC countries were reduced, the organization raised the price of oil, and held the whole universe captive.
- Another price-control tactic used by OPEC is to set production ceilings that specify how much oil may be produced by each member country.
- some OPEC nations ignored the production ceilings and this resulted in overproduction and a drop in oil prices.

Is Oligopoly an Economic Conspiracy?
Oligopoly also came about because of technological advances that enabled a handful of large firms to satisfy the demand in many markets. The result was not a complete monopoly but rather an economic order to which production is dominated by a few firms

The Philippines,home of the International Rice Research Institute (IRRI),was for sometime sad to say,at the mercy of a cartel called the “Binondo Group” or “Big Seven” whose main offices were on Dagupan Street in Binondo,Manila.
In 1990 Senator Teofisto Guingona exposed the existence of a cartel which handled over 90 percent of the total rice production of the country.

How did rice cartel operate?
1. Every year during harvest months in Nueva Ecija, Tarlac and other rice-producing provinces of Luzon the National Food Authority was supposed to conduct its buying operations.
2. But it had a little money to buy palay and few personnel if any at all to go to the field and directly buy from the farmers
Cartel buyers were able to buy the merchandise at prices dictated by them.

What are the moral principles involved in rice cartel?
Human Rights
Cartel became "invincibly" dictatorial in all aspects. Since prices and quantities are determined by the cartel, consumers are forced to buy at prices and quantities they do not want or need. Because the cartel is in charge, the buying public has nothing to say in this kind of setup and becomes the punching bag.

Is there a violation of justice?
The higher prices the cartel charge the consumer the low farm gate prices they set which enable them to reap huge profits also violate the ethical concept of commutative justice. The equilibrium point in the supply-demand analysis is the only point wherein buyers and sellers receive equal value to what they contribute.

Is rice cartel a form of cheating our farmers and consumers?
It was sinister enterprise that bamboozled thousands of Filipino farmers who were not properly compensated for the rice they literally toiled under the burning sun during summer to produce. It was cartel buyers who dictated the price at the farm level because the farmers did not have anybody else to sell their merchandise to.

How do you deal with moral dilemmas?
Establish a set of rules that can be applied in every situation is difficult if not impossible
Gray Areas
formulate a number of questions as a starting point to analyze these questions aim distinguish between the activities which are acceptable and those which are not

Is there such thing as the citric acid cartel?
Full transcript