A few of the points against offchain:
* cartel can't scale up by leveraging the existing network
What does that actually mean? Simply paying yourself fees that you could just pocket in the first place doesn't leverage anything.
* cartel can't delay non-cartel transactions to force their customers to the cartel
That makes no sense. Generating empty blocks would delay other transactions just as much as generating blocks with their own transactions.
* cartel can't prevent the customer from spending the BTC else where if cartel doesn't process onchain, thus doesn't deprive non-cartel of revenue
Of course they can. In the off-chain scenario, customers would deposit funds to addresses in a cartel wallet, and therefore would have no opportunity to later double-spend them. If you wanted to buy a dozen things from Amazon over the course of a week, rather than a dozen separate on-chain transactions, you would buy Amazon points up-front, with a single on-chain transaction, then spend those points off-chain.
This isn't exactly a new idea. It is how existing stored-value systems work, like Apple gift cards, Microsoft points, Sony PSN wallets, existing BTC exchanges...
* transaction fees are paid by customers thus it is revenue
They can take the fees from the customer either way, it makes no difference whether they then actually spend them as transaction fees.
(Plus, they would gain more customers by instead waiving the fees and offering cheaper processing than non-cartel merchants)
* they generate profit by growing the cartel, using the above factors
The above factors don't make sense, so this doesn't add anything.