Collusion is when business collaboration becomes unfair or anticompetitive. This is often a grey area: if it’s not explicitly illegal, some companies will always try it.
The Strategic Maple Syrup Reserve
Collaboration is common in business. Businesses band together to trade information, share costs, and support each other. Raisin producers chip in to buy advertising encouraging the public to eat more raisins, for example. Dairy farmers form co-ops to negotiate collectively with buyers for the best milk prices.
But when does collaboration become collusion? It’s a sticky question.
Consider the Strategic Maple Syrup Reserve. Most of the world’s maple syrup supply comes from Quebec, Canada. And syrup production can vary wildly from year to year, depending on the weather.
So the Canadian producers, mostly small businesses, banded together in 1958 to form the Federation of Quebec Maple Syrup Producers. And they set up a maple syrup storage facility called the Strategic Maple Syrup Reserve.
Initially the idea of the reserve was to make sure there’d be enough syrup for consumers, even in low production years.
But by forcing its members to sell only to the syrup reserve, and then limiting the amount the reserve put on the market each year, the Federation could strongly influence the global syrup supply and therefore also syrup prices.
In the U.S., price fixing is illegal. If a group of competing companies meet in a hotel room and agree to fix prices on cars or cereal or whatever, they can go to jail (this happens more than you’d think).
But the Maple Syrup Reserve had the approval of the Canadian government. And they could also make the argument that they didn’t totally control the market, since a fraction of maple syrup production came from non-Federation members.
Like the Strategic Maple Syrup Reserve, many government sanctioned collaborations fall in the questionable zone between collaboration and collusion. For example the OPEC cartel, which dominated the oil business and oil prices for decades. Or major league sports associations in the U.S., which tightly control the number of teams and games, player salaries, and everything else about their sports.
But when does collaboration definitely become collusion? This depends who you ask – and whether they’re one of the collaborators in the system, or stuck on the outside trying to compete.