Collusion
Topic: Market Structures, Market Failure and Competition · NCERT: Beyond NCERT
Meaning
Collusion is cooperation among rival firms to weaken competition. They may fix prices, limit output or divide up markets. It can be explicit, meaning a written or spoken agreement. It can also be tacit, meaning the firms behave in parallel without any agreement, which is very hard to prove. Collusion lets a few firms act together like a single monopoly, so buyers pay more. Under India's Competition Act 2002, agreements among competitors to fix prices, limit output, share markets or rig bids are presumed to harm competition.
Example
In 2012 the Competition Commission of India (CCI) found a cement cartel. It imposed penalties of about ₹6,307 crore on 11 firms, and the NCLAT upheld them in July 2018. In the 2021 beer cartel case (United Breweries, Carlsberg, AB InBev), the penalty was about ₹873 crore. That cartel was uncovered through the leniency programme.
Don't confuse with
- Cartel: a formal agreement among producers, and one specific form of explicit collusion. Collusion is the wider term and also covers tacit coordination.
Related concepts
- Monopolistic competition
- Oligopoly
- Duopoly
- Kinked demand curve
- Price leadership
- Limit pricing
- Contestable market
- Cartel