The legal cartel theory indicates that in any industry where market demand and the long-run average total cost curve intersect close to the latter's minimum, government regulation is mandatory and desirable.

The legal cartel theory suggests that in industries where the conditions allow firms to act as a cartel (limiting output to raise prices), government regulation might be necessary to prevent monopolistic practices, but it does not state that regulation is mandatory and desirable in all cases where demand intersects the long-run average total cost curve near its minimum. The theory primarily addresses concerns about monopolistic or oligopolistic market structures rather than prescribing regulation based solely on cost and demand intersections.