Collusion Essay

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. It is an agreement among firms to divide the market, set prices, or limit production. It can involve wage fixing, cut backs, or misrepresenting the relationship between the colluding parties. 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. Tacit collusion occurs in an industry where cartels are illegal or overt collusion is absent. In this situation, two firms may agree to play a certain strategy without explicitly saying so. Oligopolists usually try not to engage in price cutting, excessive advertising or other forms of competition. Therefore, there may be unwritten rules of collusive behavior such as price leadership. A price leader will then emerge and sets the general industry price, with other firms following suit. (O’Hagen) In this essay, I aim to analyze a case in which tacit collusion has taken place, and investigate the relationship between collusion and economic theory.

I have chosen to investigate the National Football League, NFL, in America. The NFL consists of 32 teams and therefore 32 owners. The NFL has legal agreements in place with the NFL players association, which is like a trade union for all the players. Typically in professional sports, collusion refers to when two or more teams act together to deprive players of collectively bargained rights. The NFL and the NFLPA have agreed on anti-collusion laws in their collective bargaining agreement. Unlike footballers in this country, the NFL had a salary cap. The NFL 's cap was a strict cap that the teams had to stay under at all times, with

References: [Accessed 29 March, 2011] 2 4. (Barry Wilner) NFL players’ union files collusion claim [Online] Available at (http://www.smdailyjournal.com/article_preview.php?type=sports&title=NFL%20players%92%20union%20files%20collusion%20claim&id=150663)