Horizontal Agreement Includes

Horizontal Agreement Includes: Understanding the Basics

Horizontal agreements are contractual arrangements made between companies that operate at the same level of the supply chain. In simple terms, they are agreements between direct competitors to coordinate their activities in the market. Such practices can raise competition concerns and have a negative impact on consumer welfare.

To address these concerns, competition laws in various jurisdictions prohibit certain types of horizontal agreements. However, not all horizontal agreements are anti-competitive. Some are necessary for businesses to meet customer demands, improve product quality, and reduce costs, among others.

When drafting or reviewing horizontal agreements, it is crucial to understand the concepts of horizontal agreement includes. Here`s what you need to know.

Types of Horizontal Agreements

Before we dive into the details of horizontal agreement includes, let`s briefly discuss the types of horizontal agreements.

Price-fixing and output limitations: These are agreements between competitors to set prices or output levels. Such agreements eliminate competition and harm consumers.

Market allocation: This is an agreement between competitors to divide markets based on geographic location, product line, or customer type. This practice can lead to reduced competition, higher prices, and lower quality.

Information exchange: This is an agreement between competitors to share sensitive business information that is not publicly available. Such practices can lead to collusive behavior and harm competition.

Joint production and research and development: These are horizontal agreements aimed at joint research and development efforts, pooling resources, and sharing risks. These agreements can lead to innovation, increased efficiency, and enhanced consumer welfare.

Horizontal Agreement Includes

Horizontal agreement includes refer to the provisions in a horizontal agreement that are necessary to achieve the objectives of the agreement. These provisions can be either restrictive or non-restrictive.

Restrictive provisions limit competition and can be problematic from a competition law perspective. On the other hand, non-restrictive provisions are necessary for businesses to cooperate effectively and can enhance consumer welfare.

Examples of non-restrictive provisions include:

– Provisions related to quality control and product safety.

– Provisions related to joint marketing and distribution efforts.

– Provisions related to joint purchasing of raw materials and supplies.

– Provisions related to joint research and development.

– Provisions related to standardization and interoperability.

Examples of restrictive provisions include:

– Price-fixing and output limitations.

– Market allocation.

– Information exchange that is not necessary for joint research and development efforts.

Conclusion

Horizontal agreements are a common business practice that can either enhance or harm competition and consumer welfare. It is essential to understand the types of horizontal agreements and the provisions that are necessary to achieve the intended objectives.

When drafting or reviewing a horizontal agreement, it is critical to ensure that it complies with competition laws and contains only non-restrictive provisions that are necessary to achieve the intended objectives.

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