Dividing Markets

Author:

Moneyzine Editor

2 mins

September 26th, 2023

Advertiser Disclosure

Definition

The term dividing markets is used to describe agreements between competitors to split markets and not compete with each other. Markets can be divided by geographic areas, products or services, or even customer type.

Dividing markets is illegal in many countries, and may also be considered a criminal offense in the United States under antitrust laws.

Explanation

Also known as dividing territories and market division, dividing markets involves collusion between competitors to refrain from competing in certain markets. Dividing a market can involve geographic areas, customer classes, products or services, or any combination thereof.

Competitors would agree to divide markets so they can realize extraordinary profits. By lowering or eliminating competition in a given market, the profit margins of the companies participating in the agreement will be higher.

For example, three competitors might agree to divide a state into three geographic regions they believe have equal sales potential. Two of the companies would then provide customers with prices or quotes that were unusually high; thereby allowing the company allocated the territory to realize higher profits than would be obtained if true competition existed.

In addition to dividing markets, anti-competitive practices may include bid rigging, boycotts, disparagement, dumping, exclusive dealing, price fixing, tying, as well as the unethical collection of business intelligence.

Anti-competitive laws in the United States were passed to promote fair competition for the benefit of consumers. This includes a collection of both federal and state laws that are an extension of antitrust laws such as the Sherman Antitrust Act of 1890, the Clayton Act of 1914, and the Federal Trade Commission Act of 1914.

Related Content

Is It Worth Pursuing a Master's Degree?
In an era where education is synonymous with opportunity, many consider pursuing a Master's degree a surefire way to advance their careers. However, is it really the golden ticket to success we've been led to believe?
November 5th, 2024
Gender Pay Gap by State: Where the Gap Is and Isn't Closing
The gender pay gap, the persistent disparity in average earnings between men and women throughout their careers, serves as a critical measure of wage inequality. This gap underscores the ongoing issue of income disparity, despite the ideal of equal pay for equal work.
March 14th, 2024
7 Essential Financial Moves After Losing Your Job
Navigating the stormy seas of job loss? You're not alone.
November 5th, 2024
The Most In-Demand Skills to Get Hired in 2024
Every job requires a combination of vital skills, but what skillset is valued most in 2024? As the job market evolves, staying ahead means it’s key to understand and acquire the skills that employers value most.
April 12th, 2024
Key Productivity in the Workplace Statistics for 2024
In 2023, global employee engagement saw a slight uptick, with 23% of employees engaged, up by two percentage points. However, a sizable 59% are categorized as disengaged, while actively disengaged employees, known as "loud quitting," declined to 18%. These figures highlight the persistent challenge for organizations to cultivate happiness and productivity in the workplace.
January 31st, 2024