Collusive action is an agreement between two or more parties to gain an unfair advantage over a third party. It is typically viewed as a form of unethical and potentially illegal behavior as it places the interests of the parties involved above those of their competitors, customers, or other third parties. Collusive agreements often involve two or more independent parties, who are looking to manipulate the market, price-fixing, or otherwise benefit unfairly.
Types of Collusive Action
Collusive action can be divided into two major types; those that involve price fixing and those that are focused on controlling the market. Price fixing involves an agreement between two or more companies to charge the same price for a product or service, thereby eliminating competition among those companies. Market control involves an agreement between companies to limit or control output, leading to higher prices. Additionally, collusive action is not exclusive to businesses; it can occur between countries, government entities, and individuals.
Risks of Collusion
The most severe consequence of collusive action is legal action. Many countries have implemented antitrust laws and regulations that are aimed at preventing companies or individuals from engaging in unfair business practices. Violations can result in heavy fines, criminal charges, or jail time. Moreover, companies that are suspected of colluding may face reputational damage, which can impede their ability to win new contracts and attract customers.
Examples of Collusive Action
Recent news headlines have highlighted the potential risks of collusive action. One prominent example can be found in the banking industry, where some financial institutions were accused of manipulating interbank lending rates in order to gain an advantage over competitors. In another case, which was made public in 2019, several leading technology companies were involved in a lawsuit alleging that they had made agreements not to solicit or hire each other’s employees. Both of these examples demonstrate the serious consequences of collusive action.
Final Thoughts
In today’s global economy, where competition is fierce and business relationships often cross international borders, it is important to be aware of the risks associated with collusive action. Companies that engage in this type of behavior can face serious consequences, both legal and reputational. Furthermore, the parties involved can be held responsible for any losses incurred by third parties as a result of their collusion. Businesses, therefore, should always strive to abide by both the spirit and letter of the law when dealing with other companies.