Restrictive Practices Contrivances

Restrictive Practices Contrivances

Restrictive Practices, contrivances of business men, professional workers or wage-earners which limit output and protect or make profits, fees or wages larger than they otherwise would be. Some practices such as price agreements between firms, scales of fees agreed by professions, high wages negotiated by strong trade unions are aimed directly at increasing or maintaining remuneration, but as the higher price reduces the amount likely to be sold the effect is the sane as a restriction of output.

Restrictive practices of businesses may consist of associations fixing prices, terms or conditions of purchase, sale or lease of a product, excluding enterprises from (or allocating or dividing) a market or field of business activity, allocating customers, fixing sales quotas or purchase quotas, discriminating against particular enterprises, limiting production or fixing production quotas, controlling the rate at which new techniques are introduced and using patents to foster monopoly power.

These practices are objected to because they divert resources away from employments that consumers would prefer, raise prices, inflate profits and protect inefficient high-cost firms. They are sometimes defended as means of preventing 'cut-throat' competition during slumps, maintaining standards of quality, facilitating technical co-operation between competitors, providing an offset to the power of large customers or suppliers and raising earnings from exports. It is also argued that agreements between thins do not destroy competition but transfer it to the conference table and into efforts to reduce costs, improve quality or service, increase research, and stimulate innovation or facilitate co-operative advertising.

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