Evening star., 1944-04-30
Full Employment Declared
Menaced by Cartel System
Division of World Markets Held Breeding
Ground for World War III and
Foe of Democracy
BY Charles e.. Ross.

" hDSSs
to limit or apportion output, sales or
exports; to allocate market areas; to
redistribute profits in accordance with an
agreed formula. or even to sell through
a jointly maintained sales agency.
Second, there is the patent licensing
agreement. This, says Edwards, is the
most common type of international car
| tel among large manufacturing enter
prises, especially in industries in which
there has been rapid chronological ad-
vance. The patent-licensing agreement
depends on the monopolistic rights con-
ferfed on the holder of a patent.
Through licensing their patents to one
another, the parties to such an agree
inen5 divide up market territory or the
right to sell specific kinds of products
They may also regulate the prices at
which the licensees may sell, the guam
titles they may produce, the types of
concerns through which they may dis
tribute, and various other aspects of
their business. AS old patents expire,
new ones may be invoked to support the
existing arrangement. This, as Edwards
explains, is fairly simple matter, since
the leading companies carry on extern
sive research and at no time are likely
to lack patentable inventions.
Third, there is the combine, which
controls international markets not by
contract but by uniting competitors
under common ownership or manage
ment.
These three types of cartel arrange
ment,' says Edwards, frequently sup
plement one another. The communities
OF interest established by combination
may be Joined into larger interest
groups by agreements as to patents and
processes and by formal membership in
cartel associations. The patent agree
ments may include provision for the
operation of joint subsidiaries in par
tlcular markets. AS in the case of
nitrogen, particular companies may be
united by patent agreement, while
still larger group participates in an as
sociation to control SAILS. The selection
OF devices is matter of convenience.
but the control of world markets is the
result of all of the devices in combina-
ton.
Seek to Enhance Profits.
Whatever their scope or type, inter-
national cartels are designed to en-
hance profits by reducing competition.
This aim is typically sought by direct
price fixing; ALLEGATION of production,
sales, shipments or trade territories. in
order to destroy incentives toward price
cutting; limitation of output in order to
keep prices from falling, and measures
intended to exclude nonparticipants
from the market"
Edwards goes extensively into the
actual workings of cartels as revealed
by Investigations of the Department of
Justice.
His report adds up to these major
conclusions:
Cd That the central purpose of car
tells is to maintain prices at levels higher
than would otherwise obtain
(2) That a necessary effect of the
monopolistic character of cartels is to
diminish incentives to improve quality.
Instances are found in which cartel
agreements maintain market for rela-
lively unsatisfactory goods because other
participants in the cartel are bound not
to accept the dissatisfied customers
instances which, Edwards points out,
cast doubt upon the assertion that
competition in quality takes the place
of price cutting"
90 The cartel arrangements for the
ALLEGATION of trade territory have often
(See CARTEL S Page ca