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How does collusion work?

Collusion is something that often comes up in business settings, and it can, in certain situations, be illegal.

According to Black's Legal Dictionary (2nd Edition), the term collusion will be used if two parties enter into a deceitful agreement at the expense of a third party. The dictionary words this very strongly, saying that the purpose of the arrangement has to be "evil" and even saying that the goal of the arrangement is to defraud the other party of his or her rights.

The dictionary goes on to note that this is something that happens in secret, and the two parties involved are typically those who have conflicting interests.

For example, two gas companies could both be supplying propane to the same area. They know that there are not any other suppliers who are selling to their customers. Typically, they would compete with each other, which is what keeps prices down. This is one of the advantages of a free market. Consumers get low prices because companies can't afford to overcharge.

However, if the two owners of the companies meet up behind closed doors, they may decide that they're both going to raise their prices. They know that there is no other competition, so, if they both charge more, then consumers are forced to pay the higher prices. They are forcing the consumers' hands and abusing the market.

In some cases, collusion accusations could come about when neither party meant to do anything wrong. There is often a fair amount of communication between competitors in various spaces, and conversations could spur price changes and other business moves. Those who have been accused of colluding to defraud another party in Maryland need to know their legal defense options.

Source: Black's Law Dictionary, "What is COLLUSION?," accessed June 17, 2016

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