What Is An Allocation Of Markets In Real Estate?

When it comes to antitrust violations and the Sherman act, market allocation is a big topic. But what does it actually mean? Allocating markets in real estate mean that businesses divide up geographic areas and agree not to compete with each other in those specific regions.

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This can be done in a number of ways, including through price-fixing, bid rigging, and customer allocation. While market allocation is not always illegal, it can lead to antitrust violations if it results in reduced competition.

Types of market allocation

There are two types of market allocation: horizontal and vertical.

Horizontal allocation:

Horizontal market allocation occurs when businesses in the same industry divide up geographic markets between them. For example, two companies might agree that company A will only sell its products in the eastern United States, while company B will only sell its products in the western United States.

Vertical allocation:

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Vertical market allocation occurs when businesses at different levels of the same supply chain agree to divide up geographic markets. For example, a manufacturer and its distributors might agree that the manufacturer will only sell its products in certain states, while the distributors will only sell the products in other states.

Both horizontal and vertical market allocations can lead to antitrust violations if they result in reduced competition.

Examples of Market Allocation

Here are a few examples of market allocation:

• Two companies agree not to compete in each other’s territories
• The company sells its products only through authorized dealers in specific geographic areas
• They agree not to sell its products online in order to protect brick-and-mortar retailers in specific geographic areas

While some market allocations are legal, others can violate antitrust laws and lead to investigations by the Federal Trade Commission (FTC) or the Department of Justice (DOJ). If you’re unsure about whether a particular market allocation is legal, it’s best for you to check these websites for more information.

What are the Sherman Act and the Federal Trade Commission?

The Sherman Anti-Trust Act is a federal law that prohibits anti-competitive agreements and monopolies. The Federal Trade Commission (FTC) is an independent agency that enforces the Sherman Act and other laws that protect consumers from unfair or deceptive practices.

The FTC can bring enforcement actions against companies that engage in illegal market allocation. For example, the FTC has filed lawsuits against companies for agreeing not to compete with each other in certain geographic markets.

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Why is market allocation considered harmful to the market?

Market allocation can be harmful to the market because it can lead to higher prices, reduced choices for consumers, and less innovation.

When companies agree not to compete with each other in specific geographic markets, it can create a monopoly or cartel. This can result in the companies charging higher prices and reducing the quality of their products.

In addition, market allocation can discourage new companies from entering the market, which reduces competition and innovation.

If you’re studying for your real estate exam, it’s important to be familiar with the concept of market allocation. Market allocation can be legal or illegal, depending on the circumstances. If you’re unsure about whether a particular market allocation is legal, you should check with the FTC or DOJ.

Familiarizing yourself with the concept of market allocation will help you better understand how the real estate market works.

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Category: WHICH