What is Collusion?

Let's talk about 𝗰𝗼𝗹𝗹𝘂𝘀𝗶𝗼𝗻.

What is collusion?

Collusion is a secret agreement or cooperation, usually for an illegal or deceitful purpose. Many times, it happens between two people (or companies) who would normally compete with one another to gain an unfair market advantage.

Antitrust laws and strict industry supervision aim to prevent collusion by making it difficult for companies to execute an agreement. Even without these elements, the risk alone is a gamble. There's always a chance that one party may defect from the agreement and undercut profits from other members or become a whistleblower and report dealings to the authorities.

Here are 3 examples of collusion:

• 𝗣𝗿𝗶𝗰𝗲 𝗙𝗶𝘅𝗶𝗻𝗴 - This occurs when a oligopoly, or small group of businesses in the same supply market space, agree to set a fixed price on their product. Together, they may force prices down to eliminate competition or inflate prices to make more money (at a disadvantage to consumers).

• 𝗦𝘆𝗻𝗰𝗵𝗿𝗼𝗻𝗶𝘇𝗲𝗱 𝗔𝗱𝘃𝗲𝗿𝘁𝗶𝘀𝗶𝗻𝗴 - Companies may synchronize their advertising campaigns to limit consumer knowledge of a product or service in order to boost their sales.

• 𝗦𝗵𝗮𝗿𝗶𝗻𝗴 𝗜𝗻𝘀𝗶𝗱𝗲𝗿 𝗜𝗻𝗳𝗼𝗿𝗺𝗮𝘁𝗶𝗼𝗻 - Collective partners in the financial industry may share private or preliminary information with one another, allowing them to enter and exit trades before the information is shared with the public.

If you enjoyed this deep dive into a specific type of fraud, check out our next post on Education Fraud.