The commonest merchant guild was an association of men – women were normally excluded – who claimed exclusive rights over trade in a particular locality. To secure its claims, a local merchant guild got legal privileges from the political authorities: the town government, ecclesiastical ruler, noble overlord, territorial prince or emperor. Every merchant guild we know about today enjoyed such privileges, usually enshrined in a foundation charter and enhanced by subsequent edicts. No merchant guild could exist without government privileges.

Merchant guild privileges varied in detail. But they typically granted guild members three core entitlements: the exclusive right to practise particular types of trade, the right to decide who could become a guild member and the right to regulate members' commercial activities. Together, these gave the guild the legal right to act as a monopolist – or the guild's members the right to act as a cartel.

Cartels affect two aspects of economic well-being – equity and efficiency. They affect equity – the distribution of income – because they transfer income from outsiders to cartel members. Successful cartels earn unusually high profits by increasing prices above the level that can be charged when suppliers compete. This means that customers pay more and the cartel members get higher profits.