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Competition law
Basic concepts
History of competition law Monopoly Coercive monopoly Natural monopoly Barriers to entry Herfindahl–Hirschman Index Market concentration Market power SSNIP test Relevant market Merger control
Anti-competitive practices
Monopolization Collusion Formation of cartels Price fixing Bid rigging Product bundling and tying Refusal to deal Group boycott Essential facilities Exclusive dealing Dividing territories Conscious parallelism Predatory pricing Misuse of patents and copyrights
Enforcement authorities and organizations
International Competition Network List of competition regulators
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Collusion is an agreement between two or more persons, sometimes illegal and therefore secretive, to limit open competition by deceiving, misleading, or defrauding others of their legal rights, or to obtain an objective forbidden by law typically by defrauding or gaining an unfair advantage.^{[citation needed]} It is an agreement among firms to divide the market, set prices, or limit production.^[1] It can involve "wage fixing, kickbacks, or misrepresenting the independence of the relationship between the colluding parties".^[2] In legal terms, all acts affected by collusion are considered void.^[3]

Definition[link]

In the study of economics and market competition, collusion takes place within an industry when rival companies cooperate for their mutual benefit. Collusion most often takes place within the market structure of oligopoly, where the decision of a few firms to collude can significantly impact the market as a whole. Cartels are a special case of explicit collusion. Collusion which is not overt, on the other hand, is known as tacit collusion.

Variations[link]

According to neoclassical price-determination theory and game theory, the independence of suppliers forces prices to their minimum, increasing efficiency and decreasing the price determining ability of each individual firm. However, if firms collude to increase prices, loss of sales is minimized, as consumers lack alternative choices at lower prices. This benefits the colluding firms at the cost of efficiency to society.

One variation of this traditional theory is the theory of kinked demand. Firms face a kinked demand curve if, when one firm decreases its price, other firms will follow suit in order to maintain sales, and when one firm increases its price, its rivals are unlikely to follow, as they would lose the sales' gains that they would otherwise get by holding prices at the previous level. Kinked demand potentially fosters supra-competitive prices because any one firm would receive a reduced benefit from cutting price, as opposed to the benefits accruing under neoclassical theory and certain game theoretic models such as Bertrand competition.

Indicators[link]

Practices that suggest collusion include:

• Uniform prices
• A penalty for price discounts
• Advance notice of price changes
• Information exchange

Examples[link]

Collusion is largely illegal in the United States, Canada and most of the EU due to competition/antitrust law, but implicit collusion in the form of price leadership and tacit understandings still takes place. Several examples of collusion in the United States include:

• Market division and price-fixing among manufacturers of heavy electrical equipment in the 1960s, including General Electric.^[4]
• An attempt by Major League Baseball owners to restrict players' salaries in the mid-1980s.
• The sharing of potential contract terms by NBA free agents in an effort to help a targeted franchise circumvent the salary cap
• Price fixing within food manufacturers providing cafeteria food to schools and the military in 1993.
• Market division and output determination of livestock feed additive, called lysine, by companies in the US, Japan and South Korea in 1996, Archer Daniels Midland being the most notable of these.^[5]
• Chip dumping in poker or any other high stake card game.

There are many ways that implicit collusion tends to develop:

• The practice of stock analyst conference calls and meetings of industry participants almost necessarily results in tremendous amounts of strategic and price transparency. This allows each firm to see how and why every other firm is pricing their products.
• If the practice of the industry causes more complicated pricing, which is hard for the consumer to understand (such as risk-based pricing, hidden taxes and fees in the wireless industry, negotiable pricing), this can cause competition based on price to be meaningless (because it would be too complicated to explain to the customer in a short advertisement). This causes industries to have essentially the same prices and compete on advertising and image, something theoretically as damaging to consumers as normal price fixing.^{[citation needed]}

Barriers[link]

There can be significant barriers to collusion. In any given industry, these may include:

• The number of firms: As the number of firms in an industry increases, it is more difficult to successfully organize, collude and communicate.
• Cost and demand differences between firms: If costs vary significantly between firms, it may be impossible to establish a price at which to fix output.
• Cheating: There is considerable incentive to cheat on collusion agreements; although lowering prices might trigger price wars, in the short term the defecting firm may gain considerably. This phenomenon is frequently referred to as "chiseling".
• Potential entry: New firms may enter the industry, establishing a new baseline price and eliminating collusion (though anti-dumping laws and tariffs can prevent foreign companies entering the market).
• Economic recession: An increase in average total cost or a decrease in revenue provides incentive to compete with rival firms in order to secure a larger market share and increased demand.

See also[link]

• Collusive lawsuit
• Conscious parallelism
• Corporate crime
• Baseball collusion
• Bowl Championship Series

References[link]

1. ^ Sullivan, arthur; Steven M. Sheffrin (2003). Economics: Principles in action. Upper Saddle River, New Jersey 07458: Pearson Prentice Hall. pp. 171. ISBN 0-13-063085-3. http://www.pearsonschool.com/index.cfm?locator=PSZ3R9&PMDbSiteId=2781&PMDbSolutionId=6724&PMDbCategoryId=&PMDbProgramId=12881&level=4. 
2. ^ Collusion Law & Legal Definition
3. ^ Collusion [1]. Archived 2009-10-31.
4. ^ Encyclopedia of white-collar & corporate crime. http://books.google.com/books?id=0f7yTNb_V3QC&pg=PA377&lpg=PA377&dq=market+division+collusion+heavy+electrical+equipment++1960. 
5. ^ Hunter-Gault, Charlayne (October 15, 1996). "ADM: Who's Next?". MacNeil/Lehrer Newshour (PBS). http://www.pbs.org/newshour/bb/business/october96/adm_10-15.html. Retrieved on 2007-10-17.

• Vives, X. (1999) Oligopoly pricing, MIT Press, Cambridge MA (readable; suitable for advanced undergraduates.)
• Tirole, J. (1988) The Theory of Industrial Organization, MIT Press, Cambridge MA (An organized introduction to industrial organization)
• Tirole, J. (1986), "Hierarchies and Bureaucracies", Journal of Law Economics and Organization, vol. 2, pp. 181–214.
• Tirole, J. (1992), "Collusion and the Theory of Organizations", Advances in Economic Theory: Proceedings of the Sixth World Congress of the Econometric Society, ed by J.-J. Laffont. Cambridge: Cambridge University Press, vol.2:151-206.

Gerard Batten MEP
[[file: |frameless|alt=]]
Member of the European Parliament for London
Incumbent
Assumed office 1 May 2004
Personal details
Born	(1954-03-27) 27 March 1954 (age 58) London, United Kingdom
Nationality	British
Political party	UK Independence Party
Website	Gerard Batten MEP

Gerard Joseph Batten^[1] (born 27 March 1954, London) is a Member of the European Parliament for London for the United Kingdom Independence Party (UKIP). He was first elected in 2004.

He sits as a member of the Independence and Democracy Group. He was a founder member of UKIP in September 1993. He was the first Party Secretary from 1994 to 1997. He has fought local elections, a by-election, a European election, and two general elections as a UKIP candidate. As well as his seat in the European Parliament he is a member of UKIP's National Executive Committee.^{[citation needed]}

Batten was appointed a member of the European Parliament's Subcommittee on Security and Defence in July 2004, and shortly afterwards was also appointed UKIP's official spokesman on Security and Defence. In this role, he has attacked the Labour government's plans to introduce Identity Cards.^[2]

Before becoming an MEP he was a salesman for British Telecom for 28 years. At the 2007 UK Independence Party conference, he was selected as the party's candidate to contest the London mayoral election, 2008.^[3] He stood in the 2009 UKIP leadership election,^[4] coming second.

Prodi controversy[link]

In April 2006, Batten stated that a London constituent and former FSB agent, Lieutenant-Colonel Alexander Litvinenko, had been told that Italian Prime Minister and former President of the European Commission, Romano Prodi, had been the KGB's "man in Italy", demanding an inquiry into the allegations. Batten told the European Parliament that Litvinenko had been warned by FSB deputy chief General Anatoly Trofimov that there were numerous KGB agents among Italian politicians, and that "Romano Prodi is our man in Italy". According to the Brussels-based newspaper EU Reporter on 3 April 2006, "another high-level source, a former KGB operative in London, has confirmed the story."^[5] Among the most serious claims, by Batten's account, is that Prodi assisted in the protection of KGB operatives allegedly involved in the assassination attempt on Pope John Paul II in 1981. The Italian parliamentary commission, the Guzzanti Commission, later concluded that KGB and GRU (Soviet military intelligence) did attempt to assassinate Pope John Paul II.^{[citation needed]}

On 26 April 2006, Batten repeated his call for a parliamentary inquiry, stating that: "Former, senior members of the KGB are willing to testify in such an investigation, under the right conditions... It is not acceptable that this situation is unresolved, given the importance of Russia's relations with the European Union."^{[citation needed]}

On 11 November 2006, Lt Col Litvinenko was admitted to hospital with suspected poisoning after eating at a London restaurant and died on 23 November 2006. The police later concluded he has been poisoned with polonium - even a small dose of it is sufficiently lethal. Anatoly Trofimov was assassinated by unknown gunmen in April 2005.^{[citation needed]}

On 22 January 2007, the BBC and ITV News released documents and video footage, from February 2006, in which Litvinenko made the same allegations against Prodi.^[6][7]

Taking on the Bilderberg Group[link]

On 12 September 2011, at the European Parliament in Strasbourg, France, Batten made an extraordinary one-minute speech questioning why the media do not report on the annual Bilderberg meetings of some of the world's most powerful people. Here's a transcription of his speech,^[8] also available as a YouTube video^[9]:

"Thank you, Mr. President. The [European] Commission have recently replied to my written question confirming that Commissioners [Joaquin] Almunia and [Neelie] Kroes attended the Bilderberg meeting in St. Moritz in June. The Commission cannot tell me details of what was discussed, but that surely the Bilderberg meetings do not take decisions.

If Bilderberg meetings are just talking shops, why do the most powerful figures from around the world, including George Osborne, the [British] Chancellor of the Exchequer, bother to attend? What other summit of world leaders in politics, finance and business would go completely unreported in the mainstream media such as the BBC?

It’s impossible not to reach the conclusion that the non-reporting of these events is anything other than a conspiracy between the [Bilderberg] organizers and the media. It merely confirms the belief of many that the hidden agenda and purpose of the Bilderberg Group is to bring about undemocratic world government. It’s a disgrace that the European Commission is colluding in that."

References[link]

External links[link]

Wikimedia Commons has media related to: Gerard Batten

• Official website Gerard Batten MEP
• Batten 4 London Mayor Official Mayoral Candidacy Website
• Profile on European Parliament website
• Islamic fundamentalism is incompatible with freedom and Western liberal democracy, by Gerard Batten, Freedom Today, November/December 2006
• Video Interview with Gerard Batten MEP Video Interview made on 16 February 2010