Parallel Conduct Definition & Meaning
By Steve Bain
Parallel conduct is a simple concept in economics that refers to the anti-competitive behavior of individual firms within an industry when they cooperate with each other in some way - usually to control prices and/or production and thereby make unfair economic profits at the expense of consumers.
This sort of conduct is clearly much easier to arrange in an industry that has a smaller number of big producers that dominate a market i.e., an oligopoly or an industry in monopolistic competition. The smaller number of firms allows greater opportunity for firms to share information and collude in privacy, and thereby escape detection by the authorities.
While there is no doubt that such offences occur, and possibly on a much broader scale than any of us imagine, it would be an exaggeration to claim that parallel conduct is endemic within the corporate world. Most executives and directors are mindful of antitrust law, and do not want to face the possibility of antitrust lawsuit litigation costs. In addition to the financial penalties that could be imposed on a firm, there are possible criminal charges that could be brought against the individuals involved, with lengthy prison terms handed down if found guilty in a court of law.
Parallel Conduct Example
The best parallel conduct example is given by an in-depth case study.
For this I would recommend reading about an action brought by the Australian Competition and Consumer Commission (ACCC) against Colgate-Palmolive involving what they claimed to be collusive conduct in the Australian detergent market. The case involved other suppliers and retailers i.e. Unilever, Cussons, and Woolworths, and provides valuable insights into the complexity of such cases.
As a heads up, whilst some allegations by the ACCC were settled out of court with substantial fines, other charges went to court but were ultimately dismissed by the trial court judge for lack of proof. The ACCC then appealed the trial judge ruling to the full court, but the full court dismissed the appeal.
For details on the court-case, its rulings, and the appeals that followed, see the PDF link below.