Collusion and Cartels

Collusion refers to conduct where firms cooperate over time to raise prices above competitive levels. Preventing collusion is one of the main aims of competition policy, and there is a distinction between explicit and tacit collusion. Explicit collusion refers to a cartel that colludes by directly communicating with each other. Tacit collusion is where firms collude without such explicit communication. Usually, only explicit collusion is considered illegal. Competition authorities attempt to deter cartels through sanctions on the firms and the individuals involved, and leniency programmes are an important method in which cartels are detected. Firms are encouraged to establish compliance programmes to avoid breaches of the law by their employees.