collusion

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collusion

the deliberate suppression of competition between themselves by a group of rival suppliers. Collusion may be confined to a single area of business activity for example prices, or cover a wider range of limitations including coordinated marketing, production and capacity adjustments. Collusion may be practised through formalized arrangements specifying obligations (either in writing or orally) and institutional mechanisms for coordinating behaviour, as in a CARTEL or ANTICOMPETITIVE AGREEMENT/ RESTRICTIVE TRADE AGREEMENT, or operated by more informal means through, for example, an INFORMATION AGREEMENT or CONCERTED PRACTICE.

The purpose of collusion may be to monopolize jointly the supply of a product in order to extract MONOPOLY profits, or it may be a defensive response to poor trading conditions, seeking to prevent prices from dropping to uneconomic levels. Because, however, of its generally adverse effects on market efficiency (cushioning inefficient, high-cost suppliers), and because it deprives buyers of the benefits of competition (particularly lower prices), collusion is usually prohibited outright, by COMPETITION POLICY, as in the UK, under the COMPETITION ACT 1998.

collusion

a form of INTERFIRM CONDUCT pattern in which firms arrive at an agreement or ‘understanding’ covering their market actions. Successful collusion requires the acceptance of a common objective for all firms (for example, JOINT-PROFIT MAXIMIZATION) and the suppression of behaviour inconsistent with the achievement of this goal (for example, price competition). Collusion may be either overt or tacit. Overt collusion usually takes the form of either an express agreement in writing or an express oral agreement arrived at through direct consultation between the firms concerned. Alternatively, collusion may take the form of an ‘unspoken understanding’ arrived at through firms’ repeated experiences with each other's behaviour over time.

The purpose of collusion may be jointly to monopolize the supply of a product in order to extract MONOPOLY profits, or it may be a ‘defensive’ response to poor trading conditions, seeking to prevent prices from dropping to uneconomic levels. Because, however, of its generally adverse effects on market efficiency (cushioning inefficient, high-cost suppliers) and because it deprives buyers of the benefits of competition (particularly lower prices), collusion is either prohibited outright by COMPETITION POLICY or permitted to continue only in exceptional circumstances.

In the UK, under the COMPETITION ACT 1998, collusion in the form of an ANTICOMPETITIVE AGREEMENT/RESTRICTIVE TRADE AGREEMENT is prohibited outright. Previously, under the RESTRICTIVE TRADE PRACTICES ACT, such agreements were allowed to continue, providing ‘net economic benefit’ could be established. See CARTEL, RESTRICTIVE TRADE AGREEMENT, ANTICOMPETITIVE AGREEMENT, OLIGOPOLY, DUOPOLY, INFORMATION AGREEMENT, RESTRICTIVE PRACTICES COURT.

References in periodicals archive ?
Informational advantage of the participants of a collusive agreement over the observer: players possess private information that is protected by virtue of law (company's confidential information), or is protected because it is a proof for breaching the law;
Extreme bids also appear to result from participants "throwing away" bids, which could occur for either competitive or collusive reasons.
In addition, CFHEC engaged in a collusive practice by sharing preparation of bids with a competitor, AfDB reported.
l] (n, [infinity],8) where the superscript denotes that deviation is detected after l period(s); that is, we assume that an individual deviation from any collusive agreement is detected by the rest n-1 firms after l period(s), for l = 1,2,.
Additionally, we have not found a collusive result in any other work that is similar to the one presented in this paper.
The commission, however, imposed several restrictions on the operation of the joint venture to prevent acts of competition restriction or unfair competition in the long run, including collusive act, boycott, discriminatory treatment, or restriction on vertical trading.
Among his topics are understanding the approaches and complexities of collusive agreements, the dawn of the competition principle in Western Europe 1945-62, deployment and combat 1963-68, and the internationalization of cartel policy and the challenges ahead.
We were not, however, persuaded that in any instance there was evidence of collusive acts or collusive conduct.
4 -- The Competition Commission of Pakistan (CCP) has issued show cause notices to five companies for collusive bidding in Peshawar Electric Supply Company's tender for the supply of High Tension (HT) and Low Tension (LT) Pre-stressed Concrete (PC) Poles.
4 -- The Competition Commission of Pakistan (CCP) issued show cause notices to five companies for, prima facie, collusive bidding in Peshawar Electric Supply Company's (PESCO) tender number ADB-PESCO-06-2009 for the supply of High Tension (HT) and Low Tension (LT) Pre-stressed Concrete (PC) poles.
Tadamori Oshima, secretary general of the main opposition Liberal Democratic Party, told a press conference Tuesday that Kobayashi should resign after providing an explanation to parliament, while indicating his intention to pursue other possible collusive ties between DPJ lawmakers and the teachers' union.