Shadow Guilds are basically the same thing as merc'ing, just on a larger & more organized scale. The difference really only lay in the numbers of merc's participating.
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Merc, is an overpowered player, who leaves one guild to join another that is queued for siege and is significantly low on the PvP rank structure. This ensures that the OP player is placed against weaker geared opponents with lower levels, to optimize the probability of a win. Because of the significant difference in quality of gear, levels & organization, there is also a substantial likelihood that the merc will also achieve the highest rated player marks in the event, to further gained rewards at it's conclusion.
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Shadow Guild, is a group of overpowered players, who, in the essence of achieving victory through the simplest means possible, have created multiple alternate guilds, which they use to queue up several slots in the siege window. Once the entry window is closed, and the PvP ranks are displayed, the group of players select the guild with the lowest ranking that was able to queue into the window and they all transfer to it. This does two things... one, like the individual merc, it provides a situation where the possibility of a loss becomes near to non-existent by eliminating the possibility of opponents that could offer a challenge. And 2, allows the other alternate guilds that were queued in the window but not used, to suffer losses, resulting in lower PvP rank status for the following day; thus providing another opportunity for the shadow guild to continue their collaboration unabated.
So in essence... the problem is that merc'ing has gone unchecked for so long, that these people have actually developed a system to organize the mass manipulation of the exploit. Comparatively similar to a guild comprised of wardens who use heart of the oak to d/c the opponents in mass, while their scouts take out factories through their walls, and their rogues shadow step into their castle. Only difference between them, is that the latter has been deemed bannable, while the preceding is currently only "frowned upon." And as it's been pointed out by another person... should be "taken advantage of" while it's still not considered an official offense.
Ok... siege is so broke right now, it's not even funny. Exploits run rampant, hacks are constantly in use by many players as well as guilds, glitches, lag, disconnects, there's even entire websites dedicated to programs & guides designed specifically for helping people to easily manipulate the flaws in the system. I can see where some people would see the lack of activity to fix these problems as a reason to join the crowd and just partake in the party favors since everyone else is already getting away with it. I mean, it makes sense to think that if everyone just started hacking & exploiting away, it would finally make things evenly balanced, cause no one would have the advantage anymore. But giving in and eventually defending technicalities for those who do these things, regardless of your own participation, doesn't change the fact that it's morally corrupt & in practical essence philosophically wrong. I mean seriously... just how many straws jumping onto the camel's back do you think it'll take before it eventually breaks?