Conscious parallelism

Conscious parallelism is a term used in competition law to describe pricing strategies among competitors in an oligopoly that occurs without an actual agreement between the players.[1] Instead, one competitor will take the lead in raising or lowering prices. The others will then follow suit, raising or lowering their prices by the same amount, with the understanding that greater profits result.

Competition law
Basic concepts
History of competition law Monopoly and oligopoly Coercive monopoly Natural monopoly Tacit collusion Barriers to entry Herfindahl–Hirschman Index Market concentration Market power SSNIP test Relevant market Merger control
Anti-competitive practices
Monopolization Collusion Formation of cartels Price fixing Bid rigging Product bundling and tying Refusal to deal Group boycott Essential facilities Exclusive dealing Dividing territories Conscious parallelism Predatory pricing Misuse of patents and copyrights
Enforcement authorities and organizations
International Competition Network List of competition regulators

This practice can be harmful to consumers who, if the market power of the firm is used, can be forced to pay monopoly prices for goods that should be selling for only a little more than the cost of production. Nevertheless, it is very hard to prosecute because it may occur without any collusion between the competitors. Courts have held that no violation of the antitrust laws occurs where firms independently raise or lower prices, but that a violation can be shown when "plus factors" occur, such as firms being motivated to collude and taking actions against their own economic interests.[2]

The term has also been used to describe industry-wide assumption of terms other than price. For example, all competitors in an industry might make only long-term leases of products such as heavy machinery, leaving lessors with no opportunity to make a short-term lease of that product from any competitor.