A secret agreement for an illegal purpose; conspiracy. Secret cooperation between two people in order to fool another. Collusion was often practiced by couples before no-fault divorce in order to make up a grounds for divorce (such as adultery). By fabricating a permitted reason for divorce, colluding couples hoped to trick a judge into granting their freedom from the marriage. But a spouse accused of wrongdoing who later changed his or her mind about the divorce could expose the collusion to prevent the divorce from going through.
n. where two persons (or business entities through their officers or other employees) enter into a deceitful agreement, usually secret, to defraud and/or gain an unfair advantage over a third party, competitors, consumers, or those with whom they are negotiating. Collusion can include secret price or wage fixing, secret rebates, or pretending to be independent of each other when actually conspiring together for their joint ends. It can range from small-town shopkeepers or heirs to a grandma’s estate to gigantic electronics companies or big-league baseball team owners.
Collusion is a legal term that refers to an agreement or secret cooperation between two or more individuals or entities with the intent to deceive, manipulate, or defraud others. It typically involves illegal activities such as price-fixing, bid-rigging, market allocation, or other anti-competitive practices. Collusion is considered a violation of antitrust laws and can result in severe penalties, including fines, imprisonment, and civil lawsuits. The burden of proof lies on the party alleging collusion to demonstrate the existence of an agreement and the anti-competitive effects it has caused.
Collusion is a kind of non-competitive agreement among business rivals in the same industry. Firms display collusive behaviour to cut down on competition and earn a greater proportion of profits. In other words, firms tend to desist from market fragmentation. The collusive behaviour of firms is mostly seen in an oligopolistic market structure. Collusive behaviour is also seen in stock markets. Colluding traders often share classified information on events like upcoming takeovers. Price rigging for the realisation of higher profits is a result of the collusive behaviour of sellers. (Members displaying collusive behaviour are always from same industry).
Collusion In Oligopolies
An oligopolistic market structure often displays the collusive behaviour of rival economic agents (sellers). Then rival business enterprises enter into price-fixing agreements. In this way, cartels are formed.[A cartel refers to an association of countries or companies that act collectively to control the prices of a product via control of output and marketing of the same]. A cartel is also referred to as a trust. Countries like the USA consider trust to be an illegal business entity. Firms engage in agreements (collusion) to augment profit by controlling competition. Antitrust regulatory bodies exist in some countries. Their prime concern is the identification of cartels and the breaking down of them. Cartels are against the concept of free competition. They led to the creation of market power. Collusion in an oligopoly may be either overt or tacit. Due to the intricate nature of deals among firms in oligopolistic markets, game-theoretic analysis is employed for their study.
OPEC
The Organisation of Petroleum Exporting Countries, or OPEC, is the world’s biggest cartel of oil-producing nations. It consists of 12 main petroleum-producing countries. Collectively, they control around 40 percent of global oil exports. OPEC was set up in 1960. It is involved in the fixation of production quotas and crude oil prices among member nations. Member nations include countries like Algeria, Venezuela, Gabon, the United Arab Emirates, Indonesia, Saudi Arabia, Iran, Iraq, Qatar, Kuwait, and Libya. Since oil forms the main source of the world’s energy base, OPEC wields substantial power in the global market. Vital economic factors for nations like inflation, employment, and foreign currency reserves are all affected by the pricing and production quotas of OPEC.
Collusion refers to a secretive and often illegal agreement or cooperation between individuals or entities to deceive, manipulate, or defraud others, typically for financial gain or to gain an unfair advantage.
Some examples of collusion include price-fixing among competing businesses, bid-rigging in public procurement processes, market allocation agreements, and agreements to restrict competition or control prices.
Collusion involves illegal or unethical coordination aimed at harming competition or manipulating markets, whereas cooperation or legitimate agreements involve lawful collaboration to achieve mutually beneficial outcomes.
Collusion is generally prohibited under antitrust or competition laws, which aim to promote fair competition and prevent anti-competitive behaviour. Laws such as the Sherman Antitrust Act in the United States and similar statutes in other jurisdictions address collusion.
Collusion can be detected through various means, including whistle-blower reports, market monitoring, suspicious patterns in pricing or bidding, and investigations by regulatory authorities or competition watchdogs. Evidence gathering, interviews, and forensic analysis may be used in investigations.
Consequences of collusion can include hefty fines, civil lawsuits for damages, criminal prosecution, reputational damage to businesses or individuals involved, and sanctions such as disqualification from public contracts or exclusion from certain markets.
Yes, individuals involved in collusion can be held personally liable for their actions under antitrust or competition laws. Executives, managers, and employees involved in illegal agreements may face civil or criminal penalties, including fines and imprisonment.
Businesses can prevent collusion by establishing robust compliance programmes, providing antitrust training to employees, promoting a culture of ethical behaviour and competition compliance, conducting regular audits, and implementing effective monitoring and reporting mechanisms.
If you suspect collusion in your industry or market, you should report your concerns to the relevant authorities, such as competition regulators or antitrust enforcement agencies. Whistle-blower protections may apply, and your report could help uncover illegal behaviour and protect fair competition.
Yes, some jurisdictions offer leniency or immunity programs for businesses that report their participation in collusion and cooperate with investigations. These programs may offer reduced penalties or immunity from prosecution in exchange for valuable information about illegal agreements.
Yes, collusion is generally considered illegal as it undermines fair competition and violates antitrust laws. However, there may be certain exceptions or specific circumstances where collusion is legally permissible, such as in certain labour negotiations.
Common types of collusion include price-fixing, bid-rigging, market allocation, and output restriction. Price-fixing involves conspiring to set prices at an agreed-upon level, while bid-rigging involves colluding to manipulate the bidding process to ensure a predetermined winner.
Penalties for engaging in collusion can vary depending on the jurisdiction and the severity of the offence. Individuals and companies involved in collusion may face fines, imprisonment, or both. Affected parties can also file civil lawsuits to seek damages.
Collusion can be detected through various means, including whistle-blower reports, suspicious patterns in pricing or bidding behaviour, and investigations conducted by antitrust authorities. Additionally, market analysis and economic studies can help identify potential collusion.
Yes, collusion can occur between competitors in different countries. However, it may be more challenging to enforce antitrust laws and investigate collusion cases that involve international parties due to jurisdictional complexities.
Yes, individuals can report suspected collusion anonymously in many jurisdictions. Whistle-blower protection laws exist to encourage individuals to come forward with information about illegal activities without fear of retaliation.
Yes, companies can be held liable for collusion committed by their employees if it can be proven that the employees were acting within the scope of their employment or that the company had knowledge of and condoned the collusion.
Businesses can ensure compliance with antitrust laws and avoid collusion by implementing robust compliance programs, providing regular training to employees, conducting internal audits, and seeking legal advice when engaging in activities that may raise antitrust concerns.
This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.
This glossary post was last updated: 11th April, 2024.
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