Dividing territories, market division or horizontal territorial allocation is an agreement by two companies to stay out of each other's way and reduce competition in the agreed-upon territories. The process known as geographic market allocation is one of several

anti-competitive practices Anti-competitive practices are business or government practices that prevent or reduce Competition (economics), competition in a market. Competition law, Antitrust laws ensure businesses do not engage in competitive practices that harm other, u ...

outlawed under

United States antitrust law In the United States, antitrust law is a collection of mostly federal laws that govern the conduct and organization of businesses in order to promote economic competition and prevent unjustified monopolies. The three main U.S. antitrust statute ...

s. The term is generally understood to include dividing customers as well. The competitors who agree to this type of arrangement will often reject business from customers in another's territory. Territorial allocation scheme results in an absence of

competition Competition is a rivalry where two or more parties strive for a common goal which cannot be shared: where one's gain is the other's loss (an example of which is a zero-sum game). Competition can arise between entities such as organisms, indi ...

in prices and choice of products for the affected customers. Such agreements can be illegal under

antitrust Competition law is the field of law that promotes or seeks to maintain market competition by regulating anti-competitive conduct by companies. Competition law is implemented through public and private enforcement. It is also known as antitrust l ...

regulation. For example, in 1984,

FMC Corp. FMC Corporation is an American chemical manufacturing company headquartered in Philadelphia, Pennsylvania, which originated as an insecticide producer in 1883 and later diversified into other industries. In 1941 at the beginning of US involvemen ...

and Asahi Chemical agreed to divide territories for the sale of

microcrystalline cellulose Microcrystalline cellulose (MCC) is a term for refined wood pulp and is used as a texturizer, an anti-caking agent, a fat substitute, an emulsifier, an extender, and a bulking agent in food production. The most common form is used in vitamin supple ...

, and later FMC attempted to eliminate all vestiges of competition by inviting smaller rivals also to collude.

References

Anti-competitive practices United States antitrust law {{law-stub

See also

References