University website says "when such conduct [unauthorized collaboration] is common, it becomes acceptable" - does this mean plagiarism is allowed?
You are misreading that passage.

"It becomes acceptable" is intended to mean "acceptable to the students".  To rephrase:


  When such conduct is common, students come to believe that it is acceptable.


But such students would be mistaken in that belief, from the institution's point of view.  I think the clear meaning of the passage is that such conduct is not acceptable to the institution and is considered plagiarism and academic dishonesty.