When it comes to competition law, there are certain types of agreements that are considered horizontal. These agreements involve two or more competitors that operate at the same level in the supply chain. In this article, we will delve deeper into what horizontal agreements in competition law are and how they impact businesses.
Definition of Horizontal Agreements
Horizontal agreements are agreements made between two or more competitors that operate at the same level in the supply chain. These agreements typically involve the coordination of prices, output, or other market conditions. Horizontal agreements, if not regulated, can lead to anti-competitive practices that may harm consumers.
Types of Horizontal Agreements
There are several types of horizontal agreements that can be classified as anti-competitive:
Price-Fixing
Price-fixing is one of the most common types of horizontal agreements. This is when competitors agree to set prices at a certain level. This can result in higher prices for consumers and is considered anti-competitive.
Market Sharing
When competitors agree to divide the market among themselves, they are engaging in market sharing. This can prevent new entrants from entering the market and is also considered anti-competitive.
Output Limitation
When competitors agree to limit output, they are engaging in output limitation. This can lead to higher prices for consumers and is considered anti-competitive.
Bid-Rigging
Bid-Rigging is when competitors agree on the outcome of a bidding process. This can lead to higher prices for consumers and is considered illegal.
Consequences of Horizontal Agreements
Horizontal agreements in competition law are considered illegal due to their anti-competitive nature. If caught, businesses engaging in these agreements could face severe consequences. These can include fines, legal proceedings, and damage to reputation. Additionally, consumers may not trust businesses that engage in anti-competitive behavior, leading to fewer sales and a decline in brand value.
Final Thoughts
In conclusion, horizontal agreements in competition law are agreements between two or more competitors that operate at the same level in the supply chain. These agreements can lead to anti-competitive practices that harm consumers. Businesses that engage in these practices could face legal consequences, fines, and damage to their reputation. It is essential for businesses to be aware of these agreements and adhere to the regulations in place to prevent them.