An agreement is restraint of trade is a legal term that refers to an agreement between two or more parties that restricts their ability to conduct business in a certain way. In simple terms, it means that the parties involved agree to limit their competition with one another in order to protect their own interests.
While this type of agreement may seem logical from a business standpoint, it is actually illegal under U.S. antitrust laws, which prohibit any attempt to monopolize or restrain trade. The Sherman Antitrust Act, passed in 1890, was enacted specifically to prevent these types of agreements from being made.
There are several types of agreements that may be considered restraint of trade, including non-compete agreements, price fixing agreements, and market allocation agreements. Non-compete agreements are often used by employers to prevent their employees from leaving to work for a competitor, while price fixing agreements are made between companies to set prices artificially high or low in order to control the market.
Market allocation agreements are perhaps the most egregious type of restraint of trade, as they involve dividing up the market between two or more companies in order to limit competition. For example, two competing pharmaceutical companies might agree to divide the market for a certain drug, with one company selling in the U.S. and the other in Europe.
While restraint of trade agreements may seem like a good idea for the parties involved, they are ultimately harmful to consumers and the economy as a whole. By limiting competition, companies are able to charge higher prices and stifle innovation, which ultimately harms the consumers they are supposed to serve.
In conclusion, an agreement is restraint of trade is a legal term that refers to any agreement between two or more parties that restricts their ability to conduct business in a certain way. These agreements are illegal under U.S. antitrust laws and are harmful to consumers and the economy as a whole. As such, it is important for companies to avoid making these agreements and to instead focus on fair and open competition in the marketplace.