What Is a Horizontal Agreement in Law

June 26, 2023 Uncategorized

A horizontal agreement in law is a legal term that refers to an agreement made between two or more businesses that compete in the same market. The agreement is usually made to control the market or to restrict competition. Such agreements are usually illegal and a violation of antitrust laws.

Antitrust laws are designed to promote competition in the market and protect consumers from anti-competitive practices. The laws are enforced by the government to ensure that businesses do not engage in monopolistic behavior that limits competition. Horizontal agreements are one of the practices that antitrust laws target.

A horizontal agreement can take various forms. It can be an agreement to fix prices, to divide markets, to limit output, or to coordinate bidding. For example, two rival businesses in the same industry can agree to set the same price for their products or services to avoid undercutting each other and to maintain their profit margins. This type of agreement is known as price-fixing and is illegal.

Another example of a horizontal agreement is market division. This happens when two or more businesses in the same industry agree to divide the market amongst themselves, so they can avoid competing with each other. This type of agreement is also illegal because it limits competition, and consumers are left with only a few options to choose from.

A horizontal agreement can harm consumers by creating an oligopoly or a monopoly in the market. An oligopoly is a market structure where only a few businesses dominate the market, while a monopoly is a market structure where only one business dominates the market. Both market structures can result in higher prices, poor quality products or services, and a lack of innovation.

In conclusion, a horizontal agreement in law is an agreement made between two or more businesses that compete in the same market. It is illegal and a violation of antitrust laws. Such agreements aim to control the market or to restrict competition, but they harm consumers and can result in an oligopoly or a monopoly. As a professional, it is crucial to understand the legal terms and jargons in the industry to produce high-quality and informative content.