Syndicate

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The syndicate is a type of oligopoly agreement which is used to facilitate the entry on international markets.

This agreement is a durable, includes companies of similar size, operating in the same industry and having a similar level of development.

Features

The syndicate is a kind of higher level cartel agreement. Legal agreement govern relations between companies, so economically and legally they remain independent. Unlike the cartel, companies in some aspects decide on common interests. Achieved profits and revenue shall be then divided.

While retaining their legal separation and production companies belonging to the syndicate forgo most of the right to independently the sale of the products. It creates a common sales office, which sells the products produced by companies in syndicate, fixes uniform prices and conditions of sale. Often syndicate sales office is operated by separate company to which customer is addressing orders for products manufactured by the enterprises in the syndicate.

Sales office in turn distributes orders for individual companies. The supply of the products is made directly from the specific producer, but payment is directed via sales offices. Syndicates are created in material sectors of industry due to the easier introduction the standardization of products.

The syndicate, as well as the cartel, is non-persistent form of monopolization, its members can legally withdraw from the contract.


Syndicate is a form of economic organization bringing together companies with separate legal personality belonging to one owner. Syndicate generally arises due to the concentration of capital, as a result of the merger of the companies, usually made through purchase of shares of other companies but also by permission to use of patents, licenses of parent company by the other members of the group.

Companies included in the syndicate have common management, but a separate legal personality. Its structure is based on the existence of a parent company and a group of subsidiaries which are subject to common management. Settlement of major issues are made by management of parent company, but subsidiary is independent in its day to day, operative business and is not losing its organizational and legal independence.

The main objective of the syndicate may be to reduce competition, increase profits (resulting from the manufacture on a larger scale), strengthening the financial position, and improving economic efficiency, achieving impact on the economic decisions of the state. It may bea form of collusion of manufacturers. The syndicate may also have a more loose structure, similar to the conglomerate. Often, one of a participant in the synicate is a bank that primarily serves all companies in the group.

There are two types of links forming a syndicate:

  • vertical syndicate, in which companies combine sequentially according to the stages of production technology
  • horizontal syndicate, grouping companies in one industry

References