Editing Collusion (section)

== Definition ==
In the study of [[economics]] and market [[competition]], collusion takes place within an [[Industry (economics)|industry]] when rival companies cooperate for their mutual benefit. [[Conspiracy]] usually involves an agreement between two or more sellers to take action to suppress competition between sellers in the market. Because competition among sellers can provide consumers with low prices, conspiracy agreements increase the price consumers pay for the goods. Because of this harm to consumers, it is against antitrust laws to fix prices by agreement between producers, so participants must keep it a secret. Collusion often takes place within an [[oligopoly]] [[market structure]], where there are few firms and agreements that have significant impacts on the entire market or industry. To differentiate from a [[cartel]], collusive agreements between parties may not be explicit; however, the implications of cartels and collusion are the same.<ref name="stats.oecd.org">{{Cite web|title=OECD Glossary of Statistical Terms - Collusion Definition|url=https://stats.oecd.org/glossary/detail.asp?ID=3159|access-date=2020-11-01|website=stats.oecd.org}}</ref>

Under competition law, there is an important distinction between direct and covert collusion. Direct collusion generally refers to a group of companies communicating directly with each other to coordinate and monitor their actions, such as cooperating through pricing, market allocation, sales quotas, etc. On the other hand, tacit collusion is where companies coordinate and monitor their behavior without direct communication. This type of collusion is generally not considered illegal, so companies guilty of tacit conspiracy should face no penalties even though their actions would have a similar economic impact as explicit conspiracy.

Collusion results from less competition through mutual understanding, where competitors can independently set prices and market share.<ref>Garrod, & Olczak, M. (2018). Explicit vs tacit collusion: The effects of firm numbers and asymmetries. International Journal of Industrial Organization, 56, 1–25. https://doi.org/10.1016/j.ijindorg.2017.10.006</ref> A core principle of antitrust policy is that companies must not communicate with each other. Even if conversations between multiple companies are illegal but not enforceable, the incentives to comply with collusive agreements are the same with and without communication. It is against competition law for companies to have explicit conversations in private. If evidence of conversations is accidentally left behind, it will become the most critical and conclusive evidence in antitrust litigation. Even without communication, businesses can coordinate prices by observation, but from a legal standpoint, this tacit handling leaves no evidence. Most companies cooperate through invisible collusion, so whether companies communicate is at the core of antitrust policy.<ref>{{Cite journal |last1=Fonseca |first1=Miguel A. |last2=Normann |first2=Hans-Theo |date=2012-11-01 |title=Explicit vs. tacit collusion—The impact of communication in oligopoly experiments |url=https://www.sciencedirect.com/science/article/pii/S0014292112001237 |journal=European Economic Review |language=en |volume=56 |issue=8 |pages=1759–1772 |doi=10.1016/j.euroecorev.2012.09.002 |hdl=10871/14991 |issn=0014-2921|hdl-access=free }}</ref>

Collusion is illegal in the [[United States]], [[Canada]], [[Australia]] and most of the [[European Union|EU]] due to [[antitrust]] laws, but implicit collusion in the form of [[price leadership]] and tacit understandings still takes place.

=== Tacit collusion ===
Covert collusion is known as [[tacit collusion]] and is considered legal. [[Adam Smith]] in ''[[The Wealth of Nations]]'' explains that since the masters (business owners) are fewer in number, it is easier to collude to serve common interests among those involved, such as maintaining low wages, whilst it is difficult for the labour to coordinate to protect their interests due to their vast numbers. Hence, business owners have a bigger advantage over the working class. Nevertheless, according to Adam Smith, the public rarely hears about coordination and collaborations that occur between business owners as it takes place in informal settings.<ref name="WoN">{{cite web |url=https://www.marxists.org/archive/marx/works/download/pdf/Capital-Volume-I.pdf |title=''A Critique of Political Economy''}}</ref> Some forms of explicit collusion are not considered impactful enough on an individual basis to be considered illegal, such as that which occurred by the social media group [[WallStreetBets]] in the [[GameStop short squeeze]].<ref>{{cite web |url=http://blog.practicalethics.ox.ac.uk/2021/02/ethics-of-the-gamestop-short-squeeze/ |title=Ethics of the GameStop Short Squeeze |last=McConnell |first=Doug |publisher=University of Oxford}}</ref>
There are many ways that implicit collusion tends to develop:
* The practice of stock analyst conference calls and meetings of industry participants almost necessarily results in tremendous amounts of strategic and price transparency. This allows each firm to see how and why every other firm is pricing their products.
* If the practice of the industry causes more complicated pricing, which is hard for the consumer to understand (such as [[risk-based pricing]], hidden taxes and fees in the wireless industry, negotiable pricing), this can cause competition based on price to be meaningless (because it would be too complicated to explain to the customer in a short advertisement). This causes industries to have essentially the same prices and compete on advertising and image, something theoretically as damaging to consumers as normal price fixing.<ref>{{Cite web |last=PricewaterhouseCoopers |title=The telecom price wars continue to rage in the global wireless industry |url=https://www.strategyand.pwc.com/gx/en/about/media/press-releases/telco-price-wars-continue.html |access-date=2023-04-19 |website=PwC}}</ref>