A cartel is an group of companies in a particular industry who agree not to undercut each other in prices and carve up the market territory. They restrict the amount of output they produce to stabilize prices and insure profit margins. The net result is an oligopoly. The aim of such collusion is to maintain prices prices and profit by reducing competition.
Identifying and breaking up cartels is an important part of the competition policy overseen by antitrust laws in most countries, although proving the existence of a cartel is rarely easy, as firms are usually not so careless as to put agreements to collude on paper. The desire to form cartels is strong; however, most cartels are unstable.