Market Allocation Schemes
Another form of prohibited anti-competitive business conduct is what is referred to as a market allocation scheme. Market allocation schemes involve competitors basically agreeing to stay out of one another’s way. They divide up their respective markets, usually by customer type or geographic territory, and reduce competition by ensuring that the competitor will not target their section of the market, enabling them to charge higher prices without fear of being undercut. In a customer-based market allocation scheme, one firm will agree not to market to a certain type of customer, and focus only on another type of customer, which the other firm will in turn agree not to market to. The same concept is present in geographical-based schemes, except instead of using customer type, the conspirators will use geographical territory as a basis for dividing up their respective markets.
When firms collude to divide up markets amongst themselves, they effectively eliminate competition from their slice of the market. Since company A and company B have agreed to stay out of each other’s way in marketing their similar products to customers, some consumers simply won’t go to the trouble of seeking out alternative product offerings, while others won’t even know there are alternatives out there. This allows both companies to charge higher prices without fear of being undercut, robbing the consumer of the benefits of market competition.
Market allocation schemes are prohibited and can be criminally prosecuted under section one of the Sherman Act. As a per se violation, defenses such as good motives or belief that one’s activities were legal are unavailable defenses to someone charged with a criminal antitrust violation. As such, if you are the target of an investigation or subject of an indictment involving antitrust charges, retaining quality representation must be your highest priority. The attorneys at Parkman White, LLP have years of experience and nuanced expertise in the area of criminal antitrust legislation.