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Could agreement not to compete violate anti-trust laws?

Mergers and acquisitions are regulated by federal and state laws. These laws are in place to protect the market and prevent anticompetitive transactions, like those that would result in monopolies. Without these measures, one or a few companies could acquire all their competitors, drive up prices and lower the quality of their products and services.

However, companies don’t have to merge with or acquire one another to engage in behaviors that violate antitrust laws. In fact, two companies could remain completely separate and still be accused of predatory business practices that hurt consumers. One example of this is a recent agreement between Comcast and Charter, according to a consumer advocacy spokesperson.

Comcast and Charter are the two largest cable companies in the country. They currently do not compete with each other in the cable industry, as providers prefer to be the only company with networks in a particular region. Building a separate network to compete with an existing company would be too costly.

However, the two companies are now moving into the mobile phone service market, where competition is fierce. Still, however, the cable companies say they will not compete with each other; instead, they plan to work together but remain separate entities.

They formalized the plan in an agreement that prohibits either company from acquiring or merging with another wireless company without the permission of the other party.

Critics of this agreement say that not competing with each other could still violate antitrust laws. Consumer advocates argue that by not competing, the two cable companies are facilitating regional monopolies that put the consumers at a disadvantage.

The Federal Trade Commission and the Department of Justice reviews proposed transactions and blocks them if the agencies deem them anticompetitive. In this case, however, there seems to be no action to block the agreement, which may not have been presented to either agency.

Before agreeing to any transaction or deal, whether it is a formal merger or an informal agreement to cooperate with another company, it can be crucial for business owners to consult an attorney. Legal guidance in any decision regarding a business transaction can prevent costly mistakes and unwise agreements that could threaten or compromise a company’s future. 

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