What is the potential liability of competitors that agree to split a market based on geography?

Competitors that agree to split a market based on geography engage in practices that can stifle competition, which is a primary concern of antitrust laws. Such agreements fall under Section 1 of the Sherman Act, which addresses contracts, combinations, and conspiracies in restraint of trade. This section targets collusion among businesses that can disrupt the competitive marketplace. By dividing territories, these competitors limit consumer choices and can lead to price increases or reduced quality of goods and services.

The practice of market division is often deemed a per se violation of antitrust laws, meaning it is considered illegal regardless of its actual effects on the market. Courts typically do not need to examine the intentions or the outcomes of such agreements to determine liability. Thus, Section 1 of the Sherman Act provides a legal basis for holding the competitors liable for conspiring to restrain trade by dividing geographic markets. This understanding is key for anyone studying business law, as it illustrates the fundamental principles that protect competition and consumers in the marketplace.