Collusion

Deception is not always be a solitary act. Instead, people may engage in a form of deception known as collusion, in which two or more individuals or entities collaborate to bring about mutual gain, often at the expense of others outside of the collusive relationship. The most well-known examples of collusion are found in the marketplace, when corporations agree to work together to rig prices or selectively share information. The practices of colluding companies foster monopolies and hinder an independent market system. But collusion is not limited to the marketplace. For instance, gamblers might collude to cheat and beat the house. Divorcing couples can collude to try to circumvent the red tape of the court system. Though collusive partnerships can be difficult to detect and punish, they stem from self-interest, which [Page 170]undermines the cooperative effort needed to sustain them. As a result, collusive pacts are often unstable and fleeting.

Collusion can occur within and between organizations, involving agreements that are unspoken or overt. In explicit collusion, participating parties directly communicate with one another through a phone call, an in-person meeting, or in rare cases, a written document. For example, two vendors might explicitly discuss selling merchandise at a set price. In tacit collusions, parties achieve similarly effective agreements through indirect signaling. In this case, a vendor may set high prices under the assumption that colluding partners will match those prices, without discussion. The results of this type of price-fixing include higher profits for all when customers no longer have cheaper options. Both explicit and tacit forms of collusion occur within and between organizations.

Internal collusion involves parties within an organization defrauding the organization that houses them. For example, one employee might authorize false expense reports or grant unearned overtime pay for another employee. Internal collusive acts account for about 5 percent of frauds perpetrated within corporations. Organizations can also engage in external collusion to defraud one another. A seller may arrange a special rate with a supplier that his competitors do not receive, giving that seller an unfair market advantage. Moreover, internal and external collusion can simultaneously occur. For instance, Corporation A may bribe individuals within Corporation B for access to B's resources in order to take over B's share of the market.

In addition to its organizational forms, collusion can occur on interpersonal levels. Couples may collude in deceit to expedite divorce hearings when legal forums bar consensual divorce. For example, New York City in the 1930s experienced a spate of “soft-core adultery,” in which men staged photos of themselves undressing with women that colluding couples used as evidence for divorce cases. Similarly, weary soldiers may engage in unspoken “live and let live” agreements. This type of collusion among enemy soldiers can result in unsanctioned cease-fires between trenches. High-stakes poker players may also collude to win big. Players may signal information about others' cards in order to collectively raise or lower the bet and trap other players. Importantly, bluffing in poker is not collusion, because all players knowingly agree, expect, and accept that bluffing occurs as part of fair play. In true collusion, at both organizational and interpersonal levels, all but the colluding partners are unaware of any unscrupulous coordination.

...