Tacit collusion is a collusion between competitors who do not explicitly exchange information but achieve an agreement about coordination of conduct. There are two types of tacit collusion: concerted action and conscious parallelism. In a concerted action, also known as concerted activity, competitors exchange some information without reaching any explicit agreement, while conscious parallelism implies no communication. In both types of tacit collusion, competitors agree to play a certain strategy without explicitly saying so. It is also called oligopolistic price coordination or tacit parallelism. A dataset of gasoline prices of BP, Caltex, Woolworths, Coles, and Gull from Perth gathered in the years 2001 to 2015 was used to show by statistical analysis the tacit collusion between these retailers. BP emerged as a price leader and influenced the behavior of the competitors. As result, the timing of price jumps became coordinated and the margins started to grow in 2010.
Conscious parallelism In competition law, some sources use conscious parallelism as a synonym to tacit collusion in order to describe pricing strategies among competitors in an oligopoly that occurs without an actual agreement or at least without any evidence of an actual agreement between the players. In result, one competitor will take the lead in raising or lowering prices. The others will then follow suit, raising or lowering their prices by the same amount, with the understanding that greater profits result. This practice can be harmful to consumers who, if the market power of the firm is used, can be forced to pay monopoly prices for goods that should be selling for only a little more than the cost of production. Nevertheless, it is very hard to prosecute because it may occur without any collusion between the competitors. Courts have held that no violation of the antitrust laws occurs where firms independently raise or lower prices, but that a violation can be shown when plus factors occur, such as firms being motivated to collude and taking actions against their own economic self-interests. This procedure of the courts is sometimes called as setting of a conspiracy theory. Based on this interpretation, conscious parallelism is frequently analysed under antitrust economics as a behavioural pattern that results from the strategic interdependence of firms in oligopolistic markets. When there are a few large competitors in a particular market, each firm realises that its pricing choices are going to affect (and be affected by) the responses of the other firms. As a result, firms can change prices or output in similar directions without having explicit agreements, with the effect that they approach coordinated behaviour even though each firm is acting independently. Economic theory suggests that such parallel behaviour can be the result of the fact that firms can anticipate the mutual harm that aggressive price competition will inflict on them all. In concentrated markets, the firms may thus have pricing strategies that keep their prices higher and more stable, since they look at how their competitors are doing and adjust their behaviour accordingly. This form of coordination does not necessarily involve any communication, but rather reflects the structural incentives generated by oligopolistic competition as well as the information that firms acquire by watching one another in the marketplace. For the courts and competition authorities, the challenge is deciding what lawful competitive behaviour is and what is tacit collusion. Parallel pricing alone is not illegal, as the firms are allowed to monitor market conditions and adjust their moves in response to the moves made by their competitors. As a result, antitrust enforcement has frequently depended on the identification of other indicators (commonly referred to as "plus factors"). These may involve things that would be economically irrational in the absence of coordination or evidence of communication between firms or of market conditions that strongly encourage coordinated behaviour. The existence of such factors may assist the courts in deciding whether parallel behaviour involves independent decision-making or implicit collusion. This issue has increasingly become a major issue in markets that are characterised by high levels of price transparency. Digital platforms and online marketplaces make it easier for firms to track the prices of their rivals almost instantly, allowing parallel moves to be more common and apparent. Scholars observe that the use of multisided platforms and data-driven pricing tools can reinforce such a dynamic, as firms would use real-time information to optimise their strategies without explicitly made agreements. For instance, large-scale digital ecosystems like Alibaba Group testify to how markets based on such platforms can be more transparent and responsive, and thereby set up conditions under which tacit coordination is more likely. These developments have spurred ongoing debate on how competing policy needs to evolve in ever more data-driven and digitally mediated market environments
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