What Is Horizontal Agreement

Horizontal agreement is a term used in the world of antitrust law to describe a situation in which two or more companies that compete with one another come to an agreement that restricts competition.

This type of agreement can take many different forms, including price-fixing, market allocation, and bid-rigging. Regardless of the specific method used, the goal of a horizontal agreement is typically to limit competition in order to increase profits.

While some types of horizontal agreements are legal, many are not. Price-fixing, for example, is illegal in most countries. In the United States, companies found guilty of engaging in price-fixing can face significant fines and even criminal charges.

One of the most common types of horizontal agreements is known as a «cartel.» A cartel is a group of companies that agree to cooperate with one another in order to control prices and restrict competition. Many cartels operate in secret, and their activities can be difficult to uncover.

Despite the risks involved, some companies may decide to engage in horizontal agreements in order to increase profits. This can be especially tempting in industries where there is intense competition and thin profit margins.

However, the potential consequences of engaging in a horizontal agreement can be severe. Not only can companies face legal penalties, they can also suffer damage to their reputation and face a loss of business.

For this reason, it is important for companies to be aware of the risks involved in engaging in horizontal agreements and to take steps to ensure that they are not breaking any antitrust laws. This includes consulting with legal experts and implementing internal controls to prevent anti-competitive behavior.

In conclusion, horizontal agreements are agreements between companies that restrict competition. While some types of horizontal agreements may be legal, many are not. Companies that engage in these types of agreements run the risk of facing legal penalties, damage to their reputation, and a loss of business. It is important for companies to be aware of these risks and to take steps to ensure that they are not breaking any antitrust laws.