Cartel agreements are defined as a type of coordinated activity among competing firms or organizations. These agreements are aimed at controlling the market by fixing prices, limiting production, and allocating customers, territories, and other crucial aspects of the market. When done correctly, cartels can bring significant benefits to its members, such as increased sales and profits. However, in reality, cartel agreements are often not successful. So, why is this the case?

Firstly, cartel agreements face numerous challenges due to the inherent conflicts of interest among its members. It is difficult to ensure that each member sticks to the terms of the agreement, as each member has its own agenda and may prioritize their interests above the group`s objectives. For example, a member may decide to increase production or reduce prices to gain a competitive edge and increase its market share, despite the agreement to the contrary. These actions can undermine the cartel`s efforts and lead to its eventual collapse.

Secondly, cartel agreements are often illegal and carry significant legal risks. Many governments have laws and regulations in place to prevent anti-competitive behavior and protect consumers` interests. Therefore, if a cartel is discovered, its members may face severe legal consequences, including hefty fines, imprisonment, and reputational damage. The risks involved in participating in a cartel can deter firms from joining or sticking to the agreement, making it less effective in achieving its objectives.

Thirdly, cartels face external threats from other competitors outside of the agreement. These competitors may not be bound by the agreement and may engage in aggressive pricing strategies or increase production, which can directly affect the cartel`s market share and profitability. Additionally, new entrants may enter the market, further complicating the cartel`s efforts to control the market.

Finally, market conditions and economic factors can impact the success of cartel agreements. For instance, changes in demand or supply, technological advancements, natural disasters, and political events can affect the industry`s dynamics, making it challenging to maintain the cartel`s stability and effectiveness.

In conclusion, cartel agreements are not always successful because of factors such as conflicting interests among members, legal risks, external threats, and market conditions. Although these factors can make it difficult to achieve the cartel`s objectives, some cartels have been successful in controlling their markets. However, participating in a cartel can be risky, and firms should weigh the pros and cons of such an agreement carefully before joining.