When it comes to competition law, horizontal agreements between companies can be a cause for concern. These agreements are agreements made between enterprises operating at the same level of the production or distribution chain, often competitors. The purpose of these agreements is typically to coordinate behavior or set prices, which can lead to reduced competition and higher prices for consumers. As a result, it`s essential to test for horizontal agreements and ensure that they are compliant with competition laws.
To test for horizontal agreements, competition authorities need to look at several factors. Here are some of the key components of a horizontal agreement:
1. The nature of the agreement: Horizontal agreements can come in many forms, such as price-fixing, market sharing, or bid-rigging. Competition authorities must identify the type of agreement to determine whether it is legal or not.
2. The market power of the parties involved: The parties involved in a horizontal agreement do not have to be dominant players in the market, but they must possess enough market power to have an impact on competition. Authorities must evaluate the market share of the parties involved and assess the impact the agreement could have on the market.
3. The impact on competition: The most crucial factor in determining whether a horizontal agreement is compliant with competition laws is assessing its impact on competition. If the agreement results in reduced competition, higher prices, or a limited product choice for consumers, it is considered illegal.
4. The intention of the parties: Competition authorities must also evaluate the intention of the parties involved in the agreement. If the aim is to restrict competition, it is in violation of competition laws.
Once all of these factors have been evaluated, competition authorities can determine whether the horizontal agreement is compliant with competition laws or not. If an agreement is found to be in violation of competition laws, the parties involved can face severe penalties, including fines, damages claims, or even imprisonment.
In conclusion, it`s crucial to test for horizontal agreements and ensure that they comply with competition laws. By identifying the type of agreement, evaluating the market power of the parties involved, assessing the impact on competition, and considering the intention of the parties, authorities can determine whether the agreement is legal or not. Ensuring that horizontal agreements comply with competition laws helps promote fair competition, resulting in better outcomes for consumers and the economy as a whole.