When it comes to business agreements, horizontal agreements are those between competitors in the same market. These types of agreements can take many forms and can be both beneficial and harmful to competition and consumers.
Here are a few common types of horizontal agreements:
1. Price fixing agreements – This is when competitors agree to set a certain price for their goods or services. This can harm competition and consumers by eliminating the need for companies to compete on price. Price fixing is illegal in many countries, including the United States, under antitrust laws.
2. Market allocation agreements – This type of agreement involves competitors dividing up a market into specific areas or customer groups. This can harm competition by eliminating the need for companies to compete for customers in certain areas.
3. Output restriction agreements – This is when competitors agree to limit the amount of goods or services they produce, with the aim of keeping prices high. This can harm competition and consumers by limiting the availability of goods and services.
4. Joint ventures – This is when two or more competitors join forces to create a new business venture. Joint ventures can be beneficial to competition and consumers if they lead to new and innovative products or services. However, they can also harm competition if they lead to a reduction in the number of competitors in the market.
5. Information sharing agreements – This is when competitors share information with each other, such as pricing or production costs. This can be beneficial to competition if it leads to more efficient production and lower prices for consumers. However, it can also harm competition if it leads to collusion or coordinated pricing.
It`s important to note that not all horizontal agreements are illegal or harmful to competition. In fact, some may be necessary for businesses to operate effectively, such as joint ventures or information sharing agreements. However, it`s essential for companies to ensure that their agreements comply with antitrust laws and do not harm competition or consumers.
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