In the worst case scenario, a gentlemen`s agreement can be entered into to practice anti-competitive practices such as pricing or trade quotas. Since a gentlemen`s agreement is tacit – which is not subject to the document as a binding legal treaty – it can be used to create and enforce illegal rules. Gentlemen`s agreements have often been concluded in international trade and international relations, as well as in most industries. Gentlemen`s agreements were particularly prevalent at the birth of the industrial era and well beyond the first half of the 200th year, as regulations often delayed new business practices. It was found that such agreements were used, among other things, to control prices and limit competition in the steel, iron, water and tobacco industries. Similarly, in 1907 Morgan again collaborated with Roosevelt to create a gentlemen`s agreement that would allow Us Steel to acquire its greatest competitor, Tennessee Coal and Iron, in a tacit and unspoken rule that violated the Sherman Act. The end result may, in many cases, be higher cost or lower quality products for consumers. Worse, a gentlemen`s agreement can be used as a means of promoting discriminatory practices, as in a “network of old boys.” Sometimes the enabling contracts that create an international organization are not resolved on certain procedural or voting issues. Instead of modifying the formal document, which is usually a difficult task, an informal work agreement is developed to solve a particular problem.
As long as there is a consensus to respect the informal agreement, it is not necessary to embody it in a legal document. The gentlemen`s agreement of 1907 () was an informal agreement between the United States of America and the Empire of Japan紳協 which did not allow Japanese immigration and Japan to no longer emigrate to the United States. The aim was to ease tensions between the two Pacific states. The agreement was never ratified by the U.S. Congress and was replaced by the Immigration Act of 1924. Gentlemen`s agreements between industry and the U.S. government were common in the 1800s and early 1900s. The Bureau of Corporations, a predecessor of the Federal Trade Commission, was established in 1903 to investigate monopolistic practices.