It happens in backrooms. Sometimes it happens over an expensive steak dinner or via an encrypted messaging app that's supposed to delete the evidence. You’ve probably heard the word thrown around in political scandals or high-stakes court dramas, but at its heart, collusion is just a fancy way of saying two or more rivals decided to stop competing and start cooperating—usually at your expense. It’s the antithesis of a free market. When companies or individuals collude, the invisible hand of the market gets tied behind its back.
What is a collusion anyway?
Basically, it's a "we won't hurt you if you don't hurt us" pact. In a healthy economy, companies should be trying to eat each other's lunch. They should be cutting prices, innovating faster, and fighting for your business. Collusion flips that script. Instead of fighting, they decide to share the pie. They agree on prices, split up territories, or rig bids so that everyone involved wins while the consumer loses.
Think about your local gas stations. If they all independently realize that the cost of crude oil went up, and they all raise prices by five cents, that’s just market reality. That's not collusion. But if the three owners of those stations meet at a diner at 2:00 AM and agree, "Hey, let's all keep our prices at five dollars a gallon even if the market drops," they’ve crossed the line. That's a cartel. It’s illegal, and it’s arguably one of the most damaging things that can happen in a capitalist system.
The many faces of the secret handshake
Collusion isn't a monolith. It comes in different flavors, some of which are way harder to catch than others. You’ve got explicit collusion, which is the stuff of movies—emails, recorded phone calls, and signed (stupidly) agreements to fix prices. Then there’s tacit collusion. This one is the nightmare of the Federal Trade Commission (FTC). It’s "the wink and the nod." No words are exchanged, but companies follow a leader’s price hikes because they know it’s better for everyone’s bottom line if they don't start a price war.
✨ Don't miss: How Much is 2 Billion Won in US Dollars: What Your Favorite K-Drama Doesn't Tell You
Price Fixing: The Classic Move
This is the most common form. It’s when competitors agree to set a minimum or maximum price. It’s why you might feel like certain services cost exactly the same regardless of which company you call. A famous real-world example involved the big tech giants. A few years back, companies like Apple and Google were caught in a "no-poaching" scandal. They basically agreed not to cold-call each other’s employees. By doing this, they effectively suppressed wages. Why? Because if engineers can’t get better offers from the competition, the companies don’t have to pay them more to stay. That is collusion in the labor market.
Market Sharing
Sometimes, companies don't fight over price; they fight over turf. Imagine two massive cable providers. Instead of competing in every city, Company A takes the East Coast and Company B takes the West Coast. They never enter each other’s territory. For the customer, this is a disaster. You have no choice. You pay what they want, or you go without. This kind of geographic collusion creates "local monopolies" that are incredibly hard to break.
Why do they do it?
Profit. It’s always profit.
Actually, it’s more about certainty. Competition is scary for a CEO. It's risky. You might lose. If you collude, you remove the risk. You guarantee a certain margin. Adam Smith, the father of modern economics, famously wrote in The Wealth of Nations that "People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices." He wrote that in 1776. Honestly, humans haven't changed much since then.
How do they get caught?
The Department of Justice (DOJ) and the European Commission have these things called Leniency Programs. They are brilliant and sort of devious. Basically, the first member of a cartel to "rat" on the others gets total immunity. It creates a "prisoner's dilemma." Even if you trust your fellow colluders, can you trust them not to run to the feds the moment they get nervous?
In 2013, the big story was the LIBOR scandal. Bankers from some of the world's largest financial institutions were caught manipulating the London Interbank Offered Rate. This wasn't just some niche business issue; LIBOR influenced the interest rates on trillions of dollars in loans, from mortgages to credit cards. They were caught because of internal chats where they literally thanked each other for "fixing" the rates. People went to jail for that.
The "Gray Areas" of modern tech
Here is where it gets kinda weird. In 2026, we aren't just looking for guys in suits. We're looking at algorithms. There is a growing concern about algorithmic collusion. If two competing retailers both use the same third-party software to "optimize" their pricing, and that software's AI realizes that it's more profitable for both clients if prices stay high, is that collusion? There was no meeting. There were no humans talking. But the result is the same. Regulators are still trying to figure out how to police code that learns to behave like a cartel on its own.
Is it always illegal?
Mostly, yes, if it's horizontal (between direct competitors). However, there are "vertical" agreements that are sometimes okay. A manufacturer might tell a retailer they can't sell a product below a certain price to protect the brand's image. This is often legal, though it's still a point of heavy debate among economists. Then you have things like joint ventures. When NASA works with private companies, or when two car companies share a factory to build a new engine, that's cooperation that usually benefits the public. The line between "strategic partnership" and "collusion" is often drawn by whether or not the consumer gets a better product at a better price.
Real-world impact on your wallet
When collusion happens, you pay a "corruption tax." Research has shown that cartels typically inflate prices by 15% to 25%. Think about that. Every time you buy something that’s part of a fixed market, you’re handing over an extra twenty bucks for every hundred you spend, just because some executives decided not to compete.
- Healthcare: There have been numerous lawsuits regarding generic drug manufacturers colluding to keep prices high on life-saving medications.
- Bread: In Canada, there was a massive scandal involving several major grocery chains fixing the price of bread for over a decade. Yes, even bread isn't safe.
- Electronics: The CRT and LCD industries have been hit with massive fines for price-fixing panels used in TVs and computers.
How to spot it as a consumer or business owner
You can't always prove it, but you can see the smoke. Look for "price leadership." If one company raises prices and every single competitor matches them within 24 hours—despite no change in underlying costs—your eyebrows should go up. Also, watch out for "bid rigging." If you’re a business owner and you notice that when you put out a contract for tender, the same three companies always bid, and they seem to take turns winning with almost identical price structures, you might be looking at a collusive ring.
What you should do next
If you suspect collusion in your industry or as a consumer, you aren't powerless. The system relies on whistleblowers.
- Document everything: If you see weird price patterns or hear "insider" talk, keep records.
- Report to the FTC or DOJ: In the U.S., the Bureau of Competition at the FTC is the primary watchdog. They have digital tip lines.
- Support Antitrust Legislation: Laws like the Sherman Act are the only thing standing between a fair market and a world of cartels. Support politicians who prioritize competition over corporate consolidation.
- Diversify your vendors: If you're a business, try to bring in "maverick" suppliers from outside your usual circle. Cartels hate mavericks because they don't play by the secret rules.
Collusion is a quiet thief. It doesn't rob you with a gun; it robs you through a slightly higher bill every single month. Understanding how it works is the first step in making sure the "free" in free market actually means something.