Is it legal for SxSW to create an advertising contract that prevents the advertiser/sponsor from doing business with other media properties/events in a given geographic area?

Exclusivity Clauses are a fairly common ask to make when forming a contractual relationship. So, to answer your questions: Is it Legal? I think it is. Is it enforceable? I think so, if you agreed to an exclusivity clause and broke it, you would have breached the contract. That said, I've never seen one in event sponsorship. Knowing SxSW pretty well, I probably wouldn't agree to those terms. You could get as much value hosting your own party for far less cost. My guess is that any reasonable attempt to negotiate this out wouldn't be met with much resistance from the salesperson. Also, I'd guess they wouldn't choose to enforce most infractions, but that's my opinion.

This is a reasonable thing to ask of their partners in the event. So, if I want SXSW to partner with my brand--say Mahalo.com--then it's not unreasonable for them to ask that I don't support the interlopers at their event. Of course, nothing says you have to be an official partner with SXSW. Sundance has a similar issue with interlopers. If you want to punk rockSundance Film Festival, SXSWi or the Launch Conference that's totally cool.... but you shouldn't poach the official sponsors of those events.

The question isn't is it legal... if companies agree to it, it's legal. The question is...is it ethical? And, why would anyone agree to it? You say they put this in their contracts to "control what happens in Austin during the period before, during and after the conference"...but, if companies refused to comply, they wouldn't get away with it, would they? Obviously, they carry a great deal of weight with the companies that agree. I would never agree to it. SxSW isn't THAT huge...or, rather, they don't impress me that much. Even Oprah couldn't get me to agree to those terms. And, until folks stand up and shake their fists in response, "NO, I'm NOT going to agree to those terms, not today, not ever..." it will continue to happen. Hey, we're talking a conference here... holding your sponsors hostage doesn't seem like a good idea to me.

The question, by referring to to this practice as a "restriction on normal trade practices," uses the language of antitrust law.  In some situations, an exclusive dealing agreement can violate antitrust laws.  But for this to be true, the company using the exclusive contract must be a monopolist of some relevant product.  When that is not the case, the antitrust laws generally hold that exclusive dealing contracts are neutral in their economic effects at worst and pro-competitive at best -- and thus perfectly legal. Here, the quoted section of the SXSW contract is quite narrow -- it applies only to events close in time to the SXSW event that feature performers, technology etc not featured at SXSW itself.  Given that narrow scope, I cannot imagine any court in the country holding the contract illegal under the antitrust laws. In short, I see nothing illegal in the quoted clause.This answer is not a substitute for professional legal advice ...

Seems to be that if SxSW spends all that money to get folks to Austin during this time period, and since SxSw is, essentially selling access to those people to its exhibitors and sponsors...then it seems as though folks shouldn't get that access for free.