The word collusion comes from the word ” collusion ” which refers to a certain agreement that is taken illegally and that is established by two or more parties with the sole objective of causing harm to a third party . It is a pact that is made by a company to damage something or someone. When we refer to the field of economics, collusion is an agreement or agreement made by several or a specific company, which operate under the same type of market to coordinate actions and make decisions with the sole common objective of undermining the possibilities of the rest. ofcompanies involved in competition , and therefore ends up also affecting consumers . In other words, it is a conspiracy to cause possible harm to third parties. Companies that decide to initiate collusion do so in order to set minimum prices and reach an agreement to distribute their products among the existing market because they discover that if they act with each other, they achieve greater benefits than acting on their own.
Collusion is the illicit way by one or more companies to make an agreement with the aim of coordinating actions and making decisions to achieve an attack on the possibilities that other companies that are involved in the market may have, thus causing a harm to consumers .
- When collusion occurs
- Tacit collusion
- Aggravated collusion
- Explicit
- Examples
When collusion occurs
The type of structure of supply and demand in a market directly influences the way it works and the competition between economic agents . The theory of economics establishes perfect competition , monopoly and oligopoly as parts of the structure that makes up the market and it is the oligopoly that is responsible for promoting collusion in companies. Two different situations in the market structure must be correctly analyzed in order to identify a collusion problem. One of them refers to those structural characteristicsthat has a market such as product entry barriers, degree of concentration, facilities, etc. The second is closely related to market results when it comes to the level, evolution, development and variability of the prices that the company owns. The more concentrated the industry, the greater the possibility of collusion, since very few operators can control the market situation. When the duopoly prevails in the market , the companies are responsible for setting their production levels and the prices of the products in such a way as to maximize the benefit of both through collusion.
Tacit collusion
Tacit collusion occurs when companies undergo a series of actions that usually manage to diminish the response from another company, for example, avoiding the opportunity to cut the price of an opposition . In other words, two companies agree to follow a certain strategy to market without communicating this explicit . The oligopolists usually try not to engage in price cuts, excessive advertising or other forms of competition. Therefore, there may be unwritten rules of collusive behavior included in them, such as leadershipof prices, which is what we know as tacit collusion. Then a price leader will emerge that sets the overall industry price, and other firms follow.
Aggravated collusion
The aggravates collusion is the kind of crime of collusion which is tested when able to determine that in certain allegedly hiring illegal , existed objectively and tangible causing harm economic against state , which is demonstrated by an accounting expertise and when it is possible to prove that the hiring carried out was based on illegal agreements that occurred between a certain official and the third party that was involved.
Explicit
The explicit collusion is an agreement that between competitors to achieve suppress the rivalry that depends on communications and / or transfers between companies. Rivalry between competitors hurts profits, and suppressing this rivalry through collusion is one way in which firms can improve profits . Explicit collusion is different from tacit collusion, which is not illegal. Economists rate equilibria in which firms recognize their constant interdependence, but do not require interaction direct between companies, such as communication or transfers, as tacit rather than explicit collusion.
Examples
In December 2008, the National Economic Prosecutor’s Office (FNE of Chile ) filed a lawsuit against the Ahumada , Cruz Verde and Salcobrand Pharmacies for price collusion of 220 drugs. In September 2012, the Supreme Court upheld the ruling of the Free Competition Defense Tribunal (TDLC) that found the three pharmaceutical chains guilty and sentenced to pay approximately $ 19.9 million.
In Mexico , the bidding for the laboratory testing service was suspected , in which approximately 14 companies that participated in the bid were investigated, in a three-year market of more than US $ 570 million.