A collusive practice, based on the provided definition, is an arrangement between two or more parties designed to achieve an improper purpose, including influencing improperly the actions of another party.
This definition highlights the core elements that constitute collusion in a formal context. It's not just a casual agreement, but a deliberate arrangement with a specific, inappropriate goal.
Understanding the Components of a Collusive Practice
Breaking down the definition helps clarify what a collusive practice entails:
- An Arrangement: This implies a structured agreement or understanding, whether formal or informal, between the parties involved. It's a planned course of action, not a random event.
- Between Two or More Parties: Collusion inherently requires participation from multiple entities. A single party cannot collude with itself.
- Designed to Achieve an Improper Purpose: The key motivation behind the arrangement is a goal that is unethical, illegal, or otherwise contrary to fair dealing and proper conduct.
- Including Influencing Improperly the Actions of Another Party: This is a specific example provided in the definition of what an "improper purpose" often involves. It means manipulating or unfairly affecting how another party (like a competitor, customer, or governing body) makes decisions or acts.
Practical Examples of Collusive Practices
While the definition is broad, it often applies to scenarios where parties secretly cooperate to gain an unfair advantage or harm others. Some common areas where collusive practices are found include:
- Procurement and Bidding:
- Bid Rigging: Competitors agree not to bid against each other or to submit predetermined high bids to ensure a favored party wins.
- Collusive Tendering: Parties coordinate their bids to manipulate the outcome of a tender process.
- Market Competition:
- Price Fixing: Competitors agree to set prices at a certain level, eliminating price competition.
- Market Allocation: Competitors agree to divide markets or customers among themselves instead of competing.
These examples illustrate how parties can improperly influence the actions of others (buyers, other competitors) for their own gain, fitting the definition of a collusive practice aimed at an improper purpose.
Why Collusive Practices Are Problematic
Collusive practices undermine fair competition, distort markets, and can lead to inflated prices, reduced quality, and lack of innovation. They are often illegal and subject to severe penalties under anti-trust or competition laws in many jurisdictions. Regulatory bodies actively monitor and investigate suspicious behaviors that suggest collusion.
Implementing strong internal controls, promoting ethical conduct, and encouraging reporting mechanisms are crucial steps businesses can take to prevent involvement in or identification of collusive practices.
