The Antitrust Laws of the United States of America: A Study of Competition Enforced by Law

By A. D. Neale | Go to book overview

CHAPTER II
AGREEMENTS BETWEEN COMPETITORS. II. EXCLUDING COMPETITORS AND SHARING MARKETS

1. Agreements other than price-agreements

Not all restraint of trade is directed to influencing the level of prices. While the ultimate aim of market strategy is to obtain favourable terms in bargaining, the immediate objective of many restrictive agreements is to build up or maintain or enhance a position of power in the market. Power in the market is, of course, a necessary condition of effective action even for those whose purpose in limiting competition is defensive and directed to stabilizing a situation in which competition is believed to be excessive. Whether the intention is defensive or exploitative, the classic prescription for improving a bargaining position is to exclude competitors from the market and confine the available trade so far as possible to a manageable number of participants. This chapter will deal first with those agreements between competitors which seek in various ways to regulate entry into the market or to keep out of the market those outside a favoured group.

The amount of competition in a market may also be reduced by agreements between competitors to keep out of each other's way. When a market is divisible, whether geographically by areas, functionally by classes of customers, technically by types of product or in other ways, some suppliers may agree to confine themselves to a particular selling area or class of customers or technical field in return for undertakings from others not to compete in that part of the market. These market-sharing agreements will be considered in the second part of the chapter. They have the same aim as exclusionary agreements, i.e. to improve the bargaining position of the participants by reducing the amount of competition; the difference is that market-sharing agreements seek this result from a voluntary division of effort among the participants, whereas in exclusionary agreements all the participants band together to resist encroachments from outsiders.

A link between these exclusionary and market-sharing agreements and direct price-fixing agreements is provided by agreements to limit output of a commodity or the amount of it coming into the market.

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