Not everything is zero sum. The important element is not whether or not it is mutually beneficial to the companies, but whether it is detrimental to some other party.

Price fixing, wage suppression, monopolizing etc are all detrimental to the customer, employees, or other businesses, but it is possible to collaborate or “cease competition” in certain areas for mutual benefit in ways that are not detrimental (and in fact, are also beneficial) to others.

If it's organized, but what if it's just an unspoken rule in the industry? The result would be an unchanging status que with little innovation.

If this were true I'd expect to see industries where innovation usually comes from new companies in the market. The existing companies have stopped trying, stopped competing, and thus you only see innovation from new companies. Do we see this pattern often?

My point is the number of competitors is less important than how easy it is for new competitors to enter.