Agreements in Restraint of Trade Are

When it comes to business negotiations, it is imperative that both parties agree on the terms and conditions of their agreement. However, there are certain types of agreements that may be deemed illegal or unethical. One such instance is the agreement in restraint of trade. In this article, we will take a closer look at what this type of agreement entails and why it is deemed as illegal.

Agreements in restraint of trade are legally defined as contracts that are made between two parties with the intention of limiting or preventing competition. This type of agreement typically occurs when one party, usually a larger corporation or business entity, seeks to prevent a smaller, emerging company from competing by placing restrictions or limitations on their business practices. Such practices may include preventing the smaller company from using certain technology or marketing strategies, restricting their ability to expand their business, or limiting their access to resources.

The purpose of such agreements is to limit competition, thereby increasing the larger corporation`s market power. While this may seem like a win for the larger corporation, it is considered illegal because it goes against the principles of free trade and free market competition. The establishment of monopolies or oligopolies stifles innovation, limits choices for consumers, and ultimately damages the economy.

The law forbids such agreements because they are Anti-Trust violations. Anti-Trust laws protect competition by prohibiting companies from collaborating to fix prices, allocate markets, limit production, or reduce quality. In the UK, agreements in restraint of trade are governed by the Competition Act 1998, which prohibits anti-competitive agreements and practices.

The consequences of participating in an agreement in restraint of trade can be severe. Businesses found guilty of violating anti-trust laws can face hefty fines, legal action, and reputational damage. For instance, in 2018, Apple was fined £1.2bn by the European Union for anti-competitive behavior in the sale and distribution of its products.

In conclusion, agreements in restraint of trade are illegal because they violate the principles of free trade and free market competition. Businesses should avoid entering into such agreements, as the consequences can be severe. Instead, companies should focus on developing innovative products and services, providing excellent customer service, and engaging in fair competition. By doing so, they not only comply with the law but also contribute to a thriving and prosperous economy.