Restraint of Trade

Restraint of trade, defined broadly, is a contractual limitation on business dealings or professional or gainful occupations, and is legal or illegal, ethical or unethical depending on its effect. If the restraint is in the best interests of both the parties and the public, then it is not illegal. Otherwise, if it is an agreement between or combination of businesses intended to eliminate competition, create a monopoly, artificially raise prices, or otherwise adversely affect the free market, then the restraint of trade agreement violates antitrust laws and is probably illegal. A horizontal restraint of trade is one imposed by agreement between competitors at the same level of distribution, such as a cartel in which rivals agree to restrict output and raise prices. A vertical restraint ...