In antitrust law, a horizontal agreement is an agreement between two or more competing firms operating in the same market or industry. Horizontal agreements are often viewed with suspicion under antitrust laws, as they can have the effect of reducing competition and increasing prices.
The purpose of antitrust laws is to promote and protect competition in the marketplace. Horizontal agreements, such as price-fixing or market-sharing agreements, can have the effect of reducing competition and increasing prices, which is why they are generally prohibited under antitrust laws.
The key components of a horizontal agreement include the agreement between two or more competing firms, the impact of the agreement on competition in the market, and the potential harm to consumers.
The importance of prohibiting horizontal agreements lies in the preservation of competition and the promotion of consumer welfare. By prohibiting agreements that reduce competition, antitrust laws help to promote innovation, lower prices, and enhance consumer choice.
The history of antitrust laws can be traced back to the late 19th century, when the Sherman Antitrust Act was enacted in the United States to combat the growing power of monopolies and trusts. Since then, antitrust laws have been enacted in many other countries around the world, and have become an important tool for promoting competition and protecting consumer welfare.
Some of the benefits of antitrust laws include increased competition, lower prices, and greater innovation. By promoting competition, antitrust laws help to ensure that consumers have access to a wider range of goods and services at lower prices. Additionally, antitrust laws can encourage innovation by preventing firms from using their market power to stifle competition and prevent new entrants from entering the market.
Despite its benefits, antitrust laws can also have some drawbacks. One of the main challenges is that they can be difficult to enforce, particularly in cases where the agreements or practices in question are complex or difficult to prove. Additionally, some critics argue that antitrust laws can stifle innovation and harm economic growth by discouraging collaboration and mergers.
Examples of horizontal agreements include price-fixing agreements between competing firms, market-sharing agreements, and bid-rigging agreements. These types of agreements are generally viewed with suspicion under antitrust laws and are subject to legal scrutiny and enforcement.