Legal Definitions - combination in restraint of trade

A combination in restraint of trade refers to an agreement, either openly stated or silently understood, between two or more businesses or individuals who would otherwise be competitors. The purpose of such an agreement is to unfairly manipulate a market, typically by increasing prices, limiting the availability of goods or services, or establishing a monopoly. These types of agreements are illegal under antitrust laws because they harm consumers and stifle fair competition.

Here are some examples illustrating this concept:

• Example: Price Fixing Among Retailers

  Imagine three major electronics retailers in a city, who are typically fierce competitors, secretly agree to all sell a popular new smartphone model at the exact same high price, refusing to offer any discounts. Instead of competing to offer the best deal to attract customers, they have eliminated price competition.

  Explanation: This is a combination in restraint of trade because the retailers have formed a tacit agreement to artificially inflate prices and remove competition from the market. This directly harms consumers by forcing them to pay a higher price than they would in a truly competitive environment.

• Example: Market Allocation by Service Providers

  Consider two prominent landscaping companies that operate in the same metropolitan area. They secretly agree that one company will only accept clients in the northern suburbs, while the other will exclusively serve the southern suburbs. Both companies previously served the entire area.

  Explanation: This illustrates a combination in restraint of trade because the landscaping companies have divided the market between themselves, eliminating competition within each designated geographic zone. This reduces consumer choice and potentially leads to higher prices or lower service quality, as customers in each zone have fewer options for landscaping services.

• Example: Bid Rigging for Construction Projects

  Three construction firms regularly bid on public infrastructure projects for a local government. Instead of competing fairly, they secretly decide that for the next three projects, Company A will submit the lowest bid for the first project, Company B for the second, and Company C for the third. They also agree to submit intentionally high, non-competitive bids when it's not "their turn" to win.

  Explanation: This demonstrates a combination in restraint of trade because the construction firms are colluding to eliminate genuine competition in the bidding process. This ensures they each win contracts at inflated prices, rather than the government getting the best value through competitive bidding, ultimately costing taxpayers more.