Agreements to share markets may be, for example, by territory, type or size of customer. Such an agreement may lead to a substantial lessening of competition and may be prohibited under Section 17 of the Act. The agreement need not be explicit; discounts and other incentive structures that lead to market dis-aggregation would also be prohibited. If the agreement is found to be part of a cartel, then it is also prohibited under Section 35 of the Act.
There can be agreements, however, which have the effect of sharing the market to some degree but where that effect is no more than a consequence of the main object of the agreement. Parties may agree, for example, to specialize in the manufacture of certain products in a range, or of certain components of a product, in order to be able to produce in longer runs and therefore more efficiently. Such an agreement may be caught by the Section 17 prohibition if there is, or is likely to be, an appreciable effect on competition. If, however, there are technical efficiencies arising out of the agreement such that the criteria under Section 17(4) are met, the agreement will not be prohibited. There are, however, no exemptions for cartel agreements under Section 35.