Bangladesh Competition Commission (BCC) has issued a (without date and reference number) public notice uploaded in their website warning against formation 'syndicate' to disrupt supply chain. The Competition Act 2012 prohibits the anti-competition agreement including cartel in section15. The cartel has been defined in the 2(e) of the Competition Act as "cartel" (price fixing, predatory pricing, creating market entry barrier, tying-in arrangements, and monopoly, oligopoly, etc.) and the word 'cartel' has been mentioned three (3) times but there is no mention of 'syndicate' in the competition law.
Bangladesh Government Issue import license for import of certain products. These importers form syndicate open a combine single L/c to get better price and save cost of import. Such syndicates are valid by law and facilitate business.
"Syndicate" seems like villain in our narrative of price movement, and we have heard a lot about it in every episode of price escalation of some essential food items in Bangladesh. This may be scapegoat of authorities and regulators to cover up their failure in their assign responsibilities.
Due to frequent use by the media and common persons, the syndicate has become a buzzword among consumers in Bangladesh, particularly in relation to the abnormal price hike of essential commodities over the past several years. The invisible "syndicates" are made responsible by market experts for all of these occurrences the society and even the regulating authority the Bangladesh Competition Commission (BCC). The misconception of "price hikes mean syndicates in the market" and publicity against misguided the BCC to use syndicate instead of cartel in the legal document like the public notice.
The Cartel and syndicate are both the terms used to describe groups or organizations working together for a common purposefor the benefit of the members. However, the difference between cartel and syndicate lies in their specific purposes, legality, industry focus, structure, and connotations.
Cartels are associations of independent entities, typically businesses, that collaborate in ill motive to control and manipulate market conditions. These entities, often competing with each other, form a cartel to collectively enhance their market power and maximize their profits. By eliminating competition and creating artificial scarcity, cartels can exert control over supply and demand, thereby influencing prices and reaping substantial financial gains.
A syndicate is a self-organizing group of individuals, companies, corporations or entities formed to transact some specific business, to pursue or promote a shared interest.While a cartel is a group whose purpose is to control the supply of a desired commodity to keep it's price artificially high. Drug cartels are an example.Cartels are distinguished from other forms of collusion or anti-competitive organization such as corporate mergers.Because cartels are likely to have an impact on market positions, they are subjected to competition law, which is executed by the independent commission such as Bangladesh Competition Commission.
Cartels may be overt or covert as the producers and suppliers of goods and services can have a tacit understanding or open agreement to fix the market price, allocate market, increase prices and decrease the quality of the goods and services.Such ill practices areconsidered as the worst forms of anti-competitive behaviour and condemned by the laws of various countries. On the other hand, a syndicate is a self-organizing group of companies or entities formed to transact some specific business or promote their common interests.
In contrast, there are some well accepted and recognized international cartels. One of those isthe Organization of Petroleum Exporting Countries (OPEC) which has been increasing the world prices of petroleum products at various times by imposing the production quota and fixing of prices. Besides, cartels are found in the international production system for steel, fertilizers, rice and other commodities. This kind of cartels aresupported by a situation where there is less number of suppliers but large number of customers in the markets, market demand is not too variable and individual firms output can be easily monitored by the cartel organizations.
The Difference Between Syndicate and Cartel in Competition Law may be summarized as below.
Syndicate: Purpose- Collaboration for joint ventures or investments. Legal Status- Generally legal if pro-competitive. Structure- Temporary and transparent. Activities- Resource pooling, risk-sharing. Examples- Bank underwriting syndicates, joint ventures. Economic Impact- Positive (innovation, efficiency). Regulation- Monitored for anti-competitive risks.
Cartel: Purpose- Collusion to restrict competition and control prices. Legal Status- Illegal under antitrust laws worldwide. Structure- Secretive and organized. Activities- Price fixing, market division, output restriction. Examples- Vitamin Cartel, Lysine Cartel, Truck Manufacturers Cartel. Economic Impact- Negative (higher prices, reduced competition). Regulation- Strict enforcement and heavy penalties.
The episode of cartels is a dark and treacherous one, operating in the shadows and wreaking havoc across nations. These powerful criminal organizations have become synonymous with violence, corruption, and the illicit drug trade. A cartel is illegal due to its activities, while a syndicate often associated with organized business activities and considered a legal as opposed to cartel. Cartel has a negative connotation due to its association with price-fixing and monopolistic practices, while syndicate can have both positive and negative connotations depending on its purpose.
Reining the cartel requires comprehensive and concerted approaches from all stakeholders and the effectiveness of regulator and law enforcement agencies. Many developing countries including Bangladesh are mired by the dilemma of politics eliminating the cartels as those who are engaged in anti-competitive practices.
Syndicating an investment perspective where multiple investors collaborate to share capital, insights, and risk offers several economic benefits: Capital Efficiency & Risk Mitigation; Enhanced Deal Flow & Better Investment Opportunities; Cost Reduction & Operational Efficiency; Improved Liquidity & Exit Strategies; and Knowledge & Network Expansion.
The Syndicate often finds itself embroiled in rivalries with cartels and criminal organizations. Bangladesh Competition Commission may even encourage business enterprises to form syndicate to fight against cartel.
The misconception of the terms like syndicate and cartel of the BCC may may not serve the real purpose of establishing fair competition in the market.
The writer is a former Non-Government Adviser, Bangladesh Competition Commission, Legal Economist & CEO, Bangla Chemical
