Where Does the Collusion Go When Agents Know They're Watched?

Does an already-colluding LLM cartel stop, hide, or carry on when it learns it is being watched? I placed GPT-4.1-mini sellers in a continuous double auction (competitive price $90, cartel price $100) with a strict LLM watcher that reads their chat, can start mid-run, and can impose a permanent five-character gag. Across 5×2 and 3×3 markets (30–40 rounds, 2–3 seeds per cell) I separated whether sellers are told they are watched from whether the monitor can enforce anything. Knowing about the watcher changed nothing. Enforcement did: with the gag live, messages collapsed from 150–250 characters to one or two within a round in six of six runs, and sellers converged on a single emoji. Prices stayed near $95–96, and a forced undercut was ignored in all three usable tests. Asks were frozen, so I see no sign of coordination moving from words into actions, though this market could not fully test it. Notably: chat was never what kept prices high. Markets where sellers couldn’t talk ended up in the same place as markets where they could (10 seeds per arm, p≈0.90); the collusion-primed prompt and opening asks did the work. So a quiet channel tells us little about whether collusion stopped. A monitor can win on the messages and lose on the market. In one sentence: Gagging silenced the agent-cartels words but not the actions of price manipulation 1.