Racketeering is a type of organized crime in which the perpetrators set up a coercive, fraudulent, extortionary, or otherwise illegal coordinated scheme or operation (a racket) to repeatedly or consistently collect money or other profit. According to the current common and most general definition, racketeering is an organized criminal act or activity in which the criminal act or activity is some form of substantial business, or a way to earn illegal money either regularly, or briefly but repeatedly. A racket is therefore generally a repeated or continuous organized criminal operation or enterprise.
Originally and often still specifically, racketeering may refer to an organized criminal act in which the perpetrators offer a service that will not be put into effect, offer a service to solve a nonexistent problem, or offer a service that solves a problem that would not exist without the racket. In many other cases, however, traditional racketeering may also involve perpetrators or racketeers offering an ostensibly effectual service (such as protection from other criminals) that may in fact solve an actual existing problem, with the racketeers offering to protect and actually protecting a business from robbery or vandalism; however, these racketeers will themselves coerce or threaten the business into accepting this service, often with the threat (implicit or otherwise) that failure to acquire the offered services will lead to the racketeers themselves contributing to the existing problem. Particularly, in many cases, the potential problem may be caused by the same party that offers to solve it, but that fact may be concealed, with the specific intent to engender continual patronage for this party.
The traditional and most common example of a racket is the "protection racket", in which, in exchange for regular payment, the racketeers promise to protect the targeted business or person from dangerous individuals in the neighborhood and then either collect the money or cause damage or injury to the business or individual until the business owner or targeted individual pays the protection money. The racket exists simultaneously as both the entire or partial problem and its solution, and it is used as a method of extortion.
However, the term "racket" has expanded in definition over time and may now be used less strictly to refer to any continuous or repeated illegal organized crime operation, including those that do not necessarily involve fraudulent or coercive practices or extortion. For example, "racket" may refer to the "numbers racket" or the "drug racket", neither of which generally or necessarily involve extortion, coercion, fraud, or deception with regard to the intended clientele. Because of the clandestine nature of the black market, most proceeds made from criminal rackets often go untaxed.
The term "racketeering" was coined by the Employers' Association of Chicago in June 1927 in a statement about the influence of organized crime in the Teamsters union. Specifically, a racket was defined by this coinage as being a service, such as protection (see below) which calls forth its own demand, and would not have been needed otherwise.
According to a 1990 National Police Agency survey, 41.2% of 2,106 Japanese firms polled had been contacted by racketeers, and 32% said they had yielded to their demands by buying phony magazine subscriptions and paying other fees. Sums in nearly half the cases were less than 100,000 yen, approximately $775.
In 1990, local Indian extremists killed the chairman of an Assam tea production company. They then called a meeting of tea executives and demanded protection money. They were refused, and since then there has been repeated violence and a steady stream of kidnappings.