Marketsharing

Marketsharing, also referred to as market allocation, is a form of horizontal restraint in which competing firms agree to divide markets so that each firm controls a defined geographic area, customer group, or product segment and avoids competing in the others’ territories. The arrangement can be explicit, through a contract or memorandum, or tacit, based on mutual understanding.

In practice, marketsharing partitions markets to reduce direct competition. Common forms include geographic division (different regions). It can also divide customers (segments) or product lines. While some agreements may appear neutral, they typically lessen competition, weaken price pressure, and limit consumer choice. Marketsharing may be complemented by non-price agreements (such as abstaining from certain sales activities) and, in some cases, limited price coordination within assigned segments.

Legal status is generally strict in many jurisdictions. In the United States, market-sharing agreements are usually treated as illegal per se restraints under the Sherman Act, not typically subject to a rule-of-reason analysis. In the European Union, such arrangements are viewed as a restriction of competition by object under Article 101(1) TFEU, with potential exemptions only under the tough criteria of Article 101(3) if a balance of efficiencies and no significant harm to competition can be proven. Other jurisdictions vary, but the core concern remains: marketsharing reduces competitive pressure and harms consumers.

Enforcement and remedies include investigations by competition authorities, fines, and, in some cases, orders to unwind the arrangement or alter business practices. Private parties may pursue damages or injunctions. See also cartels, horizontal restraints, and antitrust law.